Outside Risk Aversion and the Comparative Statics of Increasing Risk in Quasi-linear Decision Models
Necessary and sufficient conditions are derived to determine the effect of increases in Rothschild-Stiglitz risk on optimal decisions in a class of competitive models with price uncertainty. Outside risk aversion and composite outside risk aversion are defined. The effect of increased risk on the optimal decision is controlled by composite outside risk aversion. It is decomposed into a wealth effect, controlled by downside risk aversion, and an uncertainty effect, controlled by outside risk aversion. Composite outside risk aversion is shown to be equivalent to outside risk aversion, so that the uncertainty effect controls the overall effect. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Volume (Year): 36 (1995)
Issue (Month): 3 (August)
|Contact details of provider:|| Postal: |
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
|Order Information:|| Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598 Email: |
When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:36:y:1995:i:3:p:643-73. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or ()
If references are entirely missing, you can add them using this form.