Willingness to Pay for Risk Reduction and Risk Aversion without the Expected Utility Assumption
AbstractBy means of minimal assumptions on the individual preferences, I show that the Willingness To Pay (WTP) for both a FSD and SSD reduction of risk is the sum of a mean effect, a pure risk effect and a wealth effect. As a result, the WTP of a risk-averse decision maker may be lower than the WTP of a risk-neutral one, for a large class of individual preferencesâ€™ representation and a large class of risks. Copyright Springer 2005
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Bibliographic InfoArticle provided by Springer in its journal Theory and Decision.
Volume (Year): 59 (2005)
Issue (Month): 1 (08)
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Web page: http://www.springerlink.com/link.asp?id=100341
Risk premium; willingness to pay; first and second stochastic dominance shifts in risk;
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