The values of relative risk aversion and prudence: A context-free interpretation
AbstractIn this paper we apply to multiplicative lotteries the idea of preference for "harm disaggregation" that was used for additive lotteries in order to interpret the signs of successive derivatives of a utility function. In this way, we can explain in general terms why the values of the coefficients of relative risk aversion and relative prudence are usually compared respectively to 1 and 2. We also show how these values partition the sets of risk averse and/or prudent decision makers into two subgroups.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2162.
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Note: In : Mathematical Social Sciences, 58, 1-7, 2009
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- Eeckhoudt, Louis & Etner, Johanna & Schroyen, Fred, 2009. "The values of relative risk aversion and prudence: A context-free interpretation," Mathematical Social Sciences, Elsevier, vol. 58(1), pages 1-7, July.
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