IDEAS home Printed from https://ideas.repec.org/p/uwo/uwowop/9519.html
   My bibliography  Save this paper

First-Order Risk Aversion and Non-Differentiability

Author

Listed:
  • Segal, U.
  • Spivak, A.

Abstract

First-order risk aversion happens when the risk premium a decision maker is willing to pay to avoid the lottery $t\cdot {\tilde \epsilon }, E[{\tilde \epsilon }]=0,$ is proportional, for small t, to t. Equivalently, $\partial \pi /\partial t\mid_{t=0^{+}}> 0.$ We show that first-order risk aversion is equivalent to a certain non-differentiability of some of the local utility functions (Machina [7]).
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Segal, U. & Spivak, A., 1995. "First-Order Risk Aversion and Non-Differentiability," University of Western Ontario, Departmental Research Report Series 9519, University of Western Ontario, Department of Economics.
    • Handle: RePEc:uwo:uwowop:9519
    as

    Download full text from publisher

    File URL: https://ir.lib.uwo.ca/cgi/viewcontent.cgi?article=1397&context=economicsresrpt
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:kap:iaecre:v:17:y:2011:i:2:p:169-180 is not listed on IDEAS
    2. Safra, Zvi & Segal, Uzi, 2002. "On the Economic Meaning of Machina's Frechet Differentiability Assumption," Journal of Economic Theory, Elsevier, vol. 104(2), pages 450-461, June.
    3. Matthias Lang, 2017. "First-Order and Second-Order Ambiguity Aversion," Management Science, INFORMS, vol. 63(4), pages 1254-1269, April.
    4. Dionne, Georges & Li, Jingyuan, 2014. "When can expected utility handle first-order risk aversion?," Journal of Economic Theory, Elsevier, vol. 154(C), pages 403-422.
    5. Zvi Safra & Uzi Segal, 2008. "Calibration Results for Non-Expected Utility Theories," Econometrica, Econometric Society, vol. 76(5), pages 1143-1166, September.
    6. Battauz, Anna & De Donno, Marzia & Ortu, Fulvio, 2011. "Intertemporal asset pricing and the marginal utility of wealth," Journal of Mathematical Economics, Elsevier, vol. 47(2), pages 227-244, March.

    More about this item

    Keywords

    DECISION MAKING;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwo:uwowop:9519. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://economics.uwo.ca/research/research_papers/department_working_papers.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.