IDEAS home Printed from https://ideas.repec.org/a/spr/joecth/v29y2006i3p701-711.html

Repetitive risk aversion

Author

Listed:
  • Parkash Chander

Abstract

This paper introduces and investigates the concept of repetitive risk aversion. The risk aversion of an increasing and concave utility function is repetitive if the fear of ruin, which measures agent's aversion to risking his entire income, is also increasing and concave. This is shown to be equivalent to the behaviorally meaningful condition that the risk premium is increasing at a non-increasing rate with the size of the bet. We find an additional justification for mixed risk aversion, which is known to be stronger than standard (and thus proper) risk aversion, in terms of this concept. We discuss several economic applications of repetitive risk aversion.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Parkash Chander, 2006. "Repetitive risk aversion," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(3), pages 701-711, November.
    • Handle: RePEc:spr:joecth:v:29:y:2006:i:3:p:701-711
    DOI: 10.1007/s00199-005-0022-1
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00199-005-0022-1
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s00199-005-0022-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. CHANDER, Parkash, 2000. "A simple measure of risk aversion in the large and an application," LIDAM Discussion Papers CORE 2000041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
    3. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
    4. Parkash Chander & Louis L. Wilde, 1998. "A General Characterization of Optimal Income Tax Enforcement," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(1), pages 165-183.
    5. Gerard Debreu & Tjalling C. Koopmans, 1980. "Additively Decomposed Quasiconvex Functions," Cowles Foundation Discussion Papers 574, Cowles Foundation for Research in Economics, Yale University.
    6. Dreze, Jacques H. & Modigliani, Franco, 1972. "Consumption decisions under uncertainty," Journal of Economic Theory, Elsevier, vol. 5(3), pages 308-335, December.
    7. Caballe, Jordi & Pomansky, Alexey, 1996. "Mixed Risk Aversion," Journal of Economic Theory, Elsevier, vol. 71(2), pages 485-513, November.
    8. Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-154, January.
    9. Gollier, Christian & Pratt, John W, 1996. "Risk Vulnerability and the Tempering Effect of Background Risk," Econometrica, Econometric Society, vol. 64(5), pages 1109-1123, September.
    10. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    11. Aumann, Robert J & Kurz, Mordecai, 1977. "Power and Taxes," Econometrica, Econometric Society, vol. 45(5), pages 1137-1161, July.
    12. Burgos, Albert & Grant, Simon & Kajii, Atsushi, 2002. "Corrigendum to "Bargaining and boldness": [Games Econ. Behav. 38 (2002) 28-51]," Games and Economic Behavior, Elsevier, vol. 41(1), pages 165-168, October.
    13. Sinclair-Desgagne, Bernard & Gabel, H. Landis, 1997. "Environmental Auditing in Management Systems and Public Policy," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 331-346, July.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Jingyuan Li, 2010. "Fear of Loss and Happiness of Win: Properties and Applications," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(4), pages 749-766, December.
    2. Thomas Eichner & Rüdiger Pethig, 2015. "Efficient Management of Insecure Fossil Fuel Imports through Taxing Domestic Green Energy?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(5), pages 724-751, October.
    3. Parkash Chander, 2007. "Income Tax Evasion and the Fear of Ruin," Economica, London School of Economics and Political Science, vol. 74(294), pages 315-328, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. CHANDER, Parkash, 2000. "A simple measure of risk aversion in the large and an application," LIDAM Discussion Papers CORE 2000041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Christian Gollier & James Hammitt & Nicolas Treich, 2013. "Risk and choice: A research saga," Journal of Risk and Uncertainty, Springer, vol. 47(2), pages 129-145, October.
    3. Michel Denuit & Louis Eeckhoudt & Béatrice Rey, 2010. "Some consequences of correlation aversion in decision science," Annals of Operations Research, Springer, vol. 176(1), pages 259-269, April.
    4. Louis Eeckhoudt & Harris Schlesinger, 2006. "Putting Risk in Its Proper Place," American Economic Review, American Economic Association, vol. 96(1), pages 280-289, March.
    5. Paan Jindapon & Liqun Liu & William S. Neilson, 2021. "Comparative risk apportionment," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 9(1), pages 91-112, April.
    6. Caballe, Jordi & Pomansky, Alexey, 1997. "Complete monotonicity, background risk, and risk aversion," Mathematical Social Sciences, Elsevier, vol. 34(3), pages 205-222, October.
    7. Parkash Chander, 2004. "Risk Aversion and Income Tax Enforcement," Econometric Society 2004 Far Eastern Meetings 531, Econometric Society.
    8. Gollier, Christian, 2002. "Time Horizon and the Discount Rate," Journal of Economic Theory, Elsevier, vol. 107(2), pages 463-473, December.
    9. James Huang & Richard Stapleton, 2017. "Higher-order risk vulnerability," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(2), pages 387-406, February.
    10. Menegatti, Mario, 2014. "New results on the relationship among risk aversion, prudence and temperance," European Journal of Operational Research, Elsevier, vol. 232(3), pages 613-617.
    11. Octave Jokung & Sovan Mitra, 2020. "Health Care Investment: The Case of Multiple Sources of Risk," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 27(2), pages 231-255, June.
    12. Luigi Guiso & Tullio Jappelli, 1998. "Background Uncertainty and the Demand for Insurance Against Insurable Risks," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 23(1), pages 7-27, June.
    13. Thomas Eichner, 2008. "Mean Variance Vulnerability," Management Science, INFORMS, vol. 54(3), pages 586-593, March.
    14. Fatma Lajeri-Chaherli, 2016. "On The Concavity And Quasiconcavity Properties Of ( Σ , Μ ) Utility Functions," Bulletin of Economic Research, Wiley Blackwell, vol. 68(3), pages 287-296, April.
    15. Hochgürtel, S., 1997. "Precautionary Motives and Portfolio Decisions," Other publications TiSEM a6aa05be-cbd8-4f92-ac8e-8, Tilburg University, School of Economics and Management.
    16. Chiu, W.Henry & Madden, Paul, 2007. "Crime, punishment, and background risks," Journal of Economic Behavior & Organization, Elsevier, vol. 62(4), pages 543-555, April.
    17. Donatella Baiardi & Marco Magnani & Mario Menegatti, 2020. "The theory of precautionary saving: an overview of recent developments," Review of Economics of the Household, Springer, vol. 18(2), pages 513-542, June.
    18. Crainich, David & Eeckhoudt, Louis & Le Courtois, Olivier, 2014. "Decreasing downside risk aversion and background risk," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 59-63.
    19. Gollier, Christian, 2002. "Optimal Prevention of Unknown Risks: A Dynamic Approach with Learning," IDEI Working Papers 139, Institut d'Économie Industrielle (IDEI), Toulouse.
    20. Gollier, Christian & Jullien, Bruno & Treich, Nicolas, 2000. "Scientific progress and irreversibility: an economic interpretation of the 'Precautionary Principle'," Journal of Public Economics, Elsevier, vol. 75(2), pages 229-253, February.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    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:spr:joecth:v:29:y:2006:i:3:p:701-711. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.