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Expected Utility, mu-sigma Preferences, and Linear Distribution Classes: A Further Result

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  • Sinn, Hans-Werner

Abstract

This article is an extension of Meyer and Sinn's results on the representation of arbitrary von Neumann-Morgenstern functions in "mu-delta" space when the probability distributions to be compared belong to linear distribution class. It shows that, when absolute risk aversion decreases, stays constant, or increases not too fast, an increase in "delta," given "mu," increases the indifference curve slope: increased riskiness increases the required marginal compensation for risk when risk is measured by the standard deviation of wealth or income. Copyright 1990 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 3 (1990)
Issue (Month): 3 (September)
Pages: 277-81

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Handle: RePEc:kap:jrisku:v:3:y:1990:i:3:p:277-81

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Web page: http://www.springerlink.com/link.asp?id=100299

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Cited by:
  1. Poutvaara, Panu, 2006. "On the political economy of social security and public education," Munich Reprints in Economics 19551, University of Munich, Department of Economics.
  2. Samuel Bowles, 2000. "Globalization and Redistribution: Feasible Egalitarianism in a Competitive World," Working Papers wp34, Political Economy Research Institute, University of Massachusetts at Amherst.
  3. Wing-Keung Wong & Chenghu Ma, 2008. "Preferences over location-scale family," Economic Theory, Springer, vol. 37(1), pages 119-146, October.
  4. Bird, Edward J., 2001. "Does the welfare state induce risk-taking?," Journal of Public Economics, Elsevier, vol. 80(3), pages 357-383, June.
  5. Wagener, Andreas, 2002. "Prudence and risk vulnerability in two-moment decision models," Economics Letters, Elsevier, vol. 74(2), pages 229-235, January.
  6. Thomas Eichner & Andreas Wagener, 2002. "Increases in Risk and the Welfare State," CESifo Working Paper Series 685, CESifo Group Munich.
  7. Thomas Eichner & Andreas Wagener, 2004. "Relative risk aversion, relative prudence and comparative statics under uncertainty: The case of (μ, σ)-preferences," Bulletin of Economic Research, Wiley Blackwell, vol. 56(2), pages 159-170, 04.
  8. Samuel Bowles & Herbert Gintis, 2000. "Risk Aversion, Insurance, and the Efficiency-Equality Tradeoff," UMASS Amherst Economics Working Papers 2000-03, University of Massachusetts Amherst, Department of Economics.
  9. Broll, Udo & Wong, Wing-Keung & Wu, Mojia, 2013. "Banking Firm and Two-Moment Decision Making," MPRA Paper 51687, University Library of Munich, Germany.
  10. Broll, Udo & Egozcue, Martín & Wong, Wing-Keung & Zitikis, Ričardas, 2010. "Prospect theory and hedging risks," Dresden Discussion Paper Series in Economics 05/10, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  11. Torben Dall Schmidt, 2001. "Direct Investment, Economic Integration and the Welfare State: The Case of European Integration," ERSA conference papers ersa01p61, European Regional Science Association.

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