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Putting risk in its proper place

Author

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  • L. Eeckhoudt

    (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

  • H. Schlesinger

Abstract

This paper examines preferences toward particular classes of lottery pairs. We show how such concepts as prudence and temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expected-utility framework with differentiable utility, the direction of preference for a particular class of lottery pairs is equivalent to signing the nth derivative of the utility function. What makes our characterization appealing is its simplicity, which seems particularly amenable to experimentation.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • L. Eeckhoudt & H. Schlesinger, 2006. "Putting risk in its proper place," Post-Print hal-00283170, HAL.
    • Handle: RePEc:hal:journl:hal-00283170
    as

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    References listed on IDEAS

    as
    1. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
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