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Choosing Between Risky Prospects: The Characterization of Comparative Statics Results, and Location Independent Risk

Author

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  • Ian Jewitt

    (Department of Economics, University of Bristol, Bristol BS8 1HY, United Kingdom)

Abstract

We consider expected utility maximizers choosing from a family of risky prospects and examine how choice is influenced by the decision makers attitude to risk. If the family of risky prospects can be ordered so that as decision makers are more risk tolerant they choose a gamble higher in the ordering, then it is natural to say that the family of risky prospects admit a comparative static result. The paper characterizes when comparative static results of this sort exist. An application is to propose a criterion of location independent riskiness.

Suggested Citation

  • Ian Jewitt, 1989. "Choosing Between Risky Prospects: The Characterization of Comparative Statics Results, and Location Independent Risk," Management Science, INFORMS, vol. 35(1), pages 60-70, January.
  • Handle: RePEc:inm:ormnsc:v:35:y:1989:i:1:p:60-70
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    File URL: http://dx.doi.org/10.1287/mnsc.35.1.60
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