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The Ross Characterization of Risk Aversion: Strengthening and Extension

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  • Machina, Mark J
  • Neilson, William S

Abstract

This paper offers an interpretive comparison of the Arrow-Pratt and Ross characterizations of comparative risk aversion for expected utility maximizers. The tools used in this comparison are then applied to obtain a strengthening of the Ross cha racterization. This strengthened result is in turn extended to the ca se of general, smooth, nonexpected utility preferences over probabili ty distributions. Copyright 1987 by The Econometric Society.

Suggested Citation

  • Machina, Mark J & Neilson, William S, 1987. "The Ross Characterization of Risk Aversion: Strengthening and Extension," Econometrica, Econometric Society, vol. 55(5), pages 1139-1149, September.
  • Handle: RePEc:ecm:emetrp:v:55:y:1987:i:5:p:1139-49
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    Cited by:

    1. Li, Jingyuan & Liu, Liqun, 2014. "The monetary utility premium and interpersonal comparisons," Economics Letters, Elsevier, vol. 125(2), pages 257-260.
    2. Liu, Liqun & Meyer, Jack, 2013. "Substituting one risk increase for another: A method for measuring risk aversion," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2706-2718.
    3. Crainich, David & Eeckhoudt, Louis & Le Courtois, Olivier, 2017. "Health and portfolio choices: A diffidence approach," European Journal of Operational Research, Elsevier, vol. 259(1), pages 273-279.
    4. Liqun Liu & Jack Meyer, 2013. "Normalized measures of concavity and Ross’s strongly more risk averse order," Journal of Risk and Uncertainty, Springer, vol. 47(2), pages 185-198, October.
    5. Gelles, Gregory M. & Mitchell, Douglas W., 1999. "Ordering utility functions based on mean-seeking behavior," The Quarterly Review of Economics and Finance, Elsevier, vol. 39(3), pages 317-328.
    6. Jindapon, Paan & Neilson, William S., 2007. "Higher-order generalizations of Arrow-Pratt and Ross risk aversion: A comparative statics approach," Journal of Economic Theory, Elsevier, vol. 136(1), pages 719-728, September.

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