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Economic consequences of Nth-degree risk increases and Nth-degree risk attitudes

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  • Elyès Jouini
  • Clotilde Napp
  • Diego Nocetti

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Abstract

We study comparative statics of Nth-degree risk increases within a large class of problems that involve bidimensional payoffs and additive or multiplicative risks. We establish necessary and sufficient conditions for unambiguous impact of Nth-degree risk increases on optimal decision making. We develop a simple and intuitive approach to interpret these conditions : novel notions of directional Nth-degree risk aversion that are characterized via preferences over lotteries. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Elyès Jouini & Clotilde Napp & Diego Nocetti, 2013. "Economic consequences of Nth-degree risk increases and Nth-degree risk attitudes," Journal of Risk and Uncertainty, Springer, vol. 47(2), pages 199-224, October.
  • Handle: RePEc:kap:jrisku:v:47:y:2013:i:2:p:199-224
    DOI: 10.1007/s11166-013-9176-6
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    Citations

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    as


    Cited by:

    1. Nocetti, Diego C., 2013. "The LeChatelier principle for changes in risk," Journal of Mathematical Economics, Elsevier, vol. 49(6), pages 460-466.
    2. repec:hal:journl:halshs-01025102 is not listed on IDEAS
    3. Liu, Liqun, 2014. "Precautionary saving in the large: nth degree deteriorations in future income," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 169-172.
    4. Thierry Chauveau, 2014. "Stochastic dominance, risk and disappointment: a synthesis," Documents de travail du Centre d'Economie de la Sorbonne 14054rr, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne, revised Jan 2016.

    More about this item

    Keywords

    Comparative statics; Nth degree risk increases; Risk disaggregation; D8; D9; G11;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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