Mapping completely proper rationality
AbstractMaps of completely proper rationality are introduced so as to parametrize departure from CARA decisionmaking in terms of level effects, and deepen the link between risk aversion, prudence and higher order concepts in connection with the objective approach to riskiness set forth by Aumann and Serrano (2008). On conceptual grounds, the focus on complete orders on preferences aligns with a line of progress of the microeconomics of risk. On technical grounds, the analytical tractability of our maps may prove effective in building explicit closed form solutions for relevant measures (for instance, the utility premium) in expected utility theory, as well as in conveying transparent insights concerning the relevance of complete properness.
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Bibliographic InfoPaper provided by Department of Economics, Parma University (Italy) in its series Economics Department Working Papers with number 2013-EP01.
Date of creation: 2013
Date of revision:
risk aversion; complete properness; level effects; riskiness;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-16 (All new papers)
- NEP-MIC-2013-03-16 (Microeconomics)
- NEP-UPT-2013-03-16 (Utility Models & Prospect Theory)
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