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Even (mixed) risk lovers are prudent


  • David Crainich

    () (CNRS-LEM and IESEG School of Management)

  • Louis Eeckhoudt

    (IESEG School of Management (LEM-CNRS) and CORE (Université Catholique de Louvain))

  • Alain Trannoy

    (Aix-Marseille School of Economics, EHESS)


The purpose of this note is to analyze properties of the risk lovers? utility function beyond the positive sign of its second order derivative. We show that??contrarily to a priori beliefs??risk lovers are prudent and are willing to accumulate precautionary savings.
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(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David Crainich & Louis Eeckhoudt & Alain Trannoy, 2011. "Even (mixed) risk lovers are prudent," Working Papers 2011-ECO-05, IESEG School of Management.
  • Handle: RePEc:ies:wpaper:e201105

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    References listed on IDEAS

    1. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    2. Menezes, Carmen F. & Wang, X.Henry, 2005. "Increasing outer risk," Journal of Mathematical Economics, Elsevier, vol. 41(7), pages 875-886, November.
    3. Eeckhoudt, Louis & Schlesinger, Harris & Tsetlin, Ilia, 2009. "Apportioning of risks via stochastic dominance," Journal of Economic Theory, Elsevier, vol. 144(3), pages 994-1003, May.
    4. Cary Deck & Harris Schlesinger, 2010. "Exploring Higher Order Risk Effects," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1403-1420.
    5. Caballe, Jordi & Pomansky, Alexey, 1996. "Mixed Risk Aversion," Journal of Economic Theory, Elsevier, vol. 71(2), pages 485-513, November.
    6. Louis Eeckhoudt & Harris Schlesinger, 2006. "Putting Risk in Its Proper Place," American Economic Review, American Economic Association, vol. 96(1), pages 280-289, March.
    7. Charles N. Noussair & Stefan T. Trautmann & Gijs van de Kuilen, 2014. "Higher Order Risk Attitudes, Demographics, and Financial Decisions," Review of Economic Studies, Oxford University Press, vol. 81(1), pages 325-355.
    8. Ekern, Steinar, 1980. "Increasing Nth degree risk," Economics Letters, Elsevier, vol. 6(4), pages 329-333.
    9. Menezes, C & Geiss, C & Tressler, J, 1980. "Increasing Downside Risk," American Economic Review, American Economic Association, vol. 70(5), pages 921-932, December.
    10. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
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    Cited by:

    1. Paan Jindapon & Christopher Whaley, 2015. "Risk lovers and the rent over-investment puzzle," Public Choice, Springer, vol. 164(1), pages 87-101, July.
    2. Wang, Jianli & Li, Jingyuan, 2016. "Lattice-based monotone comparative statics on saving with Selden/Kreps–Porteus preferences," Journal of Mathematical Economics, Elsevier, vol. 65(C), pages 132-138.
    3. Sebastian Ebert & Daniel Wiesen, 2014. "Joint measurement of risk aversion, prudence, and temperance," Journal of Risk and Uncertainty, Springer, vol. 48(3), pages 231-252, June.
    4. Crainich, David & Eeckhoudt, Louis & Menegatti, Mario, 2016. "Changing risks and optimal effort," Journal of Economic Behavior & Organization, Elsevier, vol. 125(C), pages 97-106.
    5. Durmaz, Tunç, 2016. "Precautionary Storage in Electricity Markets," Discussion Papers 2016/5, Norwegian School of Economics, Department of Business and Management Science.
    6. Laurie Bréban & André Lapidus, 2013. "Adam Smith on lotteries: an interpretation and formal restatement," Working Papers hal-00914222, HAL.
    7. 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.
    8. Wong, Kit Pong, 2016. "Precautionary self-insurance-cum-protection," Economics Letters, Elsevier, vol. 145(C), pages 152-156.
    9. Harris Schlesinger, 2014. "Lattices and Lotteries in Apportioning Risk," CESifo Working Paper Series 5067, CESifo Group Munich.
    10. Huang, James & Stapleton, Richard, 2015. "The utility premium of Friedman and Savage, comparative risk aversion, and comparative prudence," Economics Letters, Elsevier, vol. 134(C), pages 34-36.
    11. repec:eee:jeborg:v:137:y:2017:i:c:p:19-36 is not listed on IDEAS
    12. Niu, Cuizhen & Guo, Xu & Wang, Tao & Xu, Peirong, 2014. "Regret theory and the competitive firm: A comment," Economic Modelling, Elsevier, vol. 41(C), pages 312-315.
    13. Cary Deck & Harris Schlesinger, 2016. "On the Robustness of Higher Order Risk Preferences," Working Papers 16-26, Chapman University, Economic Science Institute.
    14. Wang, Hongxia & Wang, Jianli & Li, Jingyuan & Xia, Xinping, 2015. "Precautionary paying for stochastic improvements under background risks," Insurance: Mathematics and Economics, Elsevier, vol. 64(C), pages 180-185.
    15. Bernard Sinclair-Desgagné & Sandrine Spaeter, 2016. "Incentive Contracts and Downside Risk Sharing," Working Papers of BETA 2016-22, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    16. Pierre Chaigneau & Louis Eeckhoudt, 2015. "Downside Risk Neutral Probabilities," Cahiers de recherche 1521, CIRPEE.
    17. Chan, Raymond H. & Clark, Ephraim & Wong, Wing-Keung, 2016. "On the Third Order Stochastic Dominance for Risk-Averse and Risk-Seeking Investors with Analysis of their Traditional and Internet Stocks," MPRA Paper 75002, University Library of Munich, Germany.
    18. Cary Deck & Harris Schlesinger, 2014. "Consistency of Higher Order Risk Preferences," Econometrica, Econometric Society, vol. 82, pages 1913-1943, September.
    19. Ebert, Sebastian & van de Kuilen, Gijs, 2015. "Experiments on bivariate risk preferences," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113055, Verein für Socialpolitik / German Economic Association.
    20. Beaud, Mickael & Blayac, Thierry & Stéphan, Maïté, 2016. "The impact of travel time variability and travelers’ risk attitudes on the values of time and reliability," Transportation Research Part B: Methodological, Elsevier, vol. 93(PA), pages 207-224.
    21. François Pannequin & Anne Corcos, 2017. "Compulsory insurance and voluntary self-insurance: substitutes or complements? A matter of risk attitudes," Working Papers 2017-78, Center for Research in Economics and Statistics.
    22. J. Atsu Amegashie & Michael Batu, 2015. "Wider Boundaries: The Welfare State and International Remittances," CESifo Working Paper Series 5456, CESifo Group Munich.
    23. Jindapon, Paan, 2013. "Do risk lovers invest in self-protection?," Economics Letters, Elsevier, vol. 121(2), pages 290-293.
    24. Gollier, Christian, 2017. "Variance stochastic orders," TSE Working Papers 17-828, Toulouse School of Economics (TSE).

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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