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Intensity of preferences for bivariate risk apportionment

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  • David Crainich

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Louis Eeckhoudt
  • Olivier Le Courtois

Abstract

Bivariate risk apportionment is the preference for dispersing risks associated with two aspects of individuals' well-being into different states of the world. In this paper, we propose an intensity measure of this preference by extending to the bivariate case the concept of marginal rate of substitution between risks of different orders introduced in the univariate case by Liu and Meyer (2013). We show that the intensity measure of the preference for bivariate risk apportionment is characterized by bivariate risk attitudes in the sense of Ross. The usefulness of our measures to understand economic choices is illustrated by the analysis of two specific decisions: savings under environmental risk and medical treatment in the presence of diagnostic risks.

Suggested Citation

  • David Crainich & Louis Eeckhoudt & Olivier Le Courtois, 2020. "Intensity of preferences for bivariate risk apportionment," Post-Print hal-03133126, HAL.
    • Handle: RePEc:hal:journl:hal-03133126
    DOI: 10.1016/j.jmateco.2020.03.007
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    1. repec:dau:papers:123456789/7344 is not listed on IDEAS
    2. Michel Denuit & Louis Eeckhoudt & Mario Menegatti, 2011. "Correlated risks, bivariate utility and optimal choices," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(1), pages 39-54, January.
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    10. Denuit, Michel & Eeckhoudt, Louis & Tsetlin, Ilia & Winkler, Robert, 2013. "Multivariate Concave and Convex Stochastic Dominance," LIDAM Reprints ISBA 2013012, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
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    Cited by:

    1. Wong, Kit Pong, 2021. "Comparative risk aversion with two risks," Journal of Mathematical Economics, Elsevier, vol. 97(C).
    2. Paan Jindapon & Liqun Liu & William S. Neilson, 2021. "Comparative risk apportionment," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(1), pages 91-112, April.

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    More about this item

    Keywords

    Bivariate utility function; Increase in bivariate risks; Risk apportionment; Comparative risk aversion; Ross risk aversion;
    All these keywords.

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