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Income risk aversion with quantity constraints

Author

Listed:
  • Schroyen, Fred

    () (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

In this paper, I consider a consumer with a concave utility function over n commodities and trace out the consequences of quantity constraints on product markets for the consumer’s aversion towards income risk. I show that the effect can be decomposed in a cardinal and ordinal term, that both terms may add up to a non-linear effct on the coefficient of relative risk aversion, and that a severely rationed consumer may even become less risk averse then when unconstrained.

Suggested Citation

  • Schroyen, Fred, 2010. "Income risk aversion with quantity constraints," Discussion Paper Series in Economics 8/2010, Norwegian School of Economics, Department of Economics.
  • Handle: RePEc:hhs:nhheco:2010_008
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    References listed on IDEAS

    as
    1. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Household demand; income risk aversion; quantity constraints.;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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