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Comparative risk aversion of different preferences

Author

Listed:
  • Richard Ruble

    () (EMLYON Business School, Ecully, F-69134, France)

Abstract

An article about Kihlstrom and Mirman about comparative risk aversion with many goods is critiqued. If "more risk averse" is interpreted as signifying that an individual is less willing to accept a median-preserving spread, then risk aversion cannot be compared across individuals with different preferences. If it is interpreted as signifying that an individual has a greater directional risk premium, then risk aversion may be compared across individuals with different preferences, in particular in partial equilibrium analysis.

Suggested Citation

  • Richard Ruble, 2011. "Comparative risk aversion of different preferences," Working Papers 1119, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
  • Handle: RePEc:gat:wpaper:1119
    as

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    File URL: ftp://ftp.gate.cnrs.fr/RePEc/2011/1119.pdf
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    References listed on IDEAS

    as
    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    2. Kuno J.M. Huisman & Peter M. Kort, 2015. "Strategic capacity investment under uncertainty," RAND Journal of Economics, RAND Corporation, pages 376-408.
    3. Thijssen, Jacco J.J. & Huisman, Kuno J.M. & Kort, Peter M., 2012. "Symmetric equilibrium strategies in game theoretic real option models," Journal of Mathematical Economics, Elsevier, vol. 48(4), pages 219-225.
    4. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474, June.
    5. Grenadier, Steven R, 1996. " The Strategic Exercise of Options: Development Cascades and Overbuilding in Real Estate Markets," Journal of Finance, American Finance Association, vol. 51(5), pages 1653-1679, December.
    6. Mason, Robin & Weeds, Helen, 2010. "Investment, uncertainty and pre-emption," International Journal of Industrial Organization, Elsevier, pages 278-287.
    7. John V. Leahy, 1993. "Investment in Competitive Equilibrium: The Optimality of Myopic Behavior," The Quarterly Journal of Economics, Oxford University Press, pages 1105-1133.
    8. Kuno J.M. Huisman & Peter M. Kort, 2015. "Strategic capacity investment under uncertainty," RAND Journal of Economics, RAND Corporation, pages 376-408.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    risk aversion; risk premium;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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