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Increases In Risk And Linear Payoffs


  • DIONNE, G.


This paper is concerned with the effect of increases in risk on optimal decision variables for the class of linear payoffs. The authors show that, for this class of payoffs, one can extend the class of admissible increases in risk and obtain the desirable comparative statics properties. They propose the definition of a 'relatively weak increase in risk' and apply it to the case of the competitive firm with constant marginal costs, the standard portfolio model, and the coinsurance problem. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Suggested Citation

  • Dionne, G. & Eeckhoudt, L., 1990. "Increases In Risk And Linear Payoffs," Cahiers de recherche 9019, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  • Handle: RePEc:mtl:montec:9019

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    References listed on IDEAS

    1. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-122, February.
    2. Datcher, Linda, 1983. "The Impact of Informal Networks of Quit Behavior," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 491-495, August.
    3. Lars Osberg & R.L. Mazany & Richard Apostle & Don Clairmont, 1986. "Job Mobility, Wage Determination and Market Segmentation in the Presence of Sample Selection Bias," Canadian Journal of Economics, Canadian Economics Association, vol. 19(2), pages 319-346, May.
    4. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    5. Shorey, John, 1980. "An Analysis of Quits Using Industry Turnover Data," Economic Journal, Royal Economic Society, vol. 90(363), pages 821-837, December.
    6. James F. Ragan Jr., 1984. "Investigating the Decline in Manufacturing Quit Rates," Journal of Human Resources, University of Wisconsin Press, vol. 19(1), pages 53-71.
    7. Olivia S. Mitchell, 1982. "Fringe Benefits and Labor Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 17(2), pages 286-298.
    8. Weiss, Andrew, 1984. "Determinants of Quit Behavior," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 371-387, July.
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    Cited by:

    1. repec:spr:joecth:v:64:y:2017:i:1:d:10.1007_s00199-016-0978-z is not listed on IDEAS
    2. Hau, Arthur, 2010. "Comparative statics of changes in risk on monotonically and partially responsive kinked payoffs," European Journal of Operational Research, Elsevier, vol. 201(1), pages 267-276, February.
    3. 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.
    4. Alain Chateauneuf & Ghizlane Lakhnati, 2005. "Increases in risk and demand for risky asset," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00194413, HAL.
    5. Gollier, Christian & Schlesinger, Harris, 2002. "Changes in risk and asset prices," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 747-760, May.
    6. Christian Gollier & Pierre-François Koehl & Jean-Charles Rochet, 1996. "Risk-Taking Behavior with Limited Liability and Risk Aversion," Center for Financial Institutions Working Papers 96-13, Wharton School Center for Financial Institutions, University of Pennsylvania.
    7. Louis Eeckhoudt & Liqun Liu & Jack Meyer, 2017. "Restricted increases in risk aversion and their application," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(1), pages 161-181, June.
    8. Chateauneuf, A. & Lakhnati, G., 2015. "Increases in risk and demand for a risky asset," Mathematical Social Sciences, Elsevier, vol. 75(C), pages 44-48.
    9. Burton Hollifield & Alan Kraus, 2009. "Defining Bad News: Changes in Return Distributions That Decrease Risky Asset Demand," Management Science, INFORMS, vol. 55(7), pages 1227-1236, July.
    10. Suyeol Ryu & Iltae Kim, 2005. "Portfolio Choice for Increases in Risk and Prudence Revisited," Journal of Economics, Springer, vol. 86(3), pages 293-300, December.
    11. Choi, Gyemyung & Kim, Iltae & Snow, Arthur, 2000. "Comparative statics predictions for the cross-effects of central dominance changes in risk with quasilinear payoffs," Economics Letters, Elsevier, vol. 66(1), pages 41-48, January.
    12. Gollier, Christian, 1993. "Portfolio Dominance, Lower Conditional Expectation And The Monotone Likelihood Ratio Order," Working Papers 014, Risk and Insurance Archive.
    13. EECKHOUDT, Louis & Christian GOLLIER, 1994. "Demand for Risky Assets and Stochastic Dominance: A Note," Working Papers 007, Risk and Insurance Archive.
    14. Gollier, Christian & Schlesinger, Harris, 1996. "Portfolio choice under noisy asset returns," Economics Letters, Elsevier, vol. 53(1), pages 47-51, October.
    15. Iltae Kim & Suyeol Ryu, 2006. "The Comparative Statics for Linear Payoffs and Increases in Risk," Korean Economic Review, Korean Economic Association, vol. 22, pages 437-459.
    16. Gollier, Christian & Pierre-Francois KOEHL & Jean-Charles ROCHET, 1993. "Risk-Taking Behaviour With Expected Utility and Limited Liability: Applications to the Regulation of Financial Intermediaries," Working Papers 016, Risk and Insurance Archive.

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    risk ; linear models ; enterprises ; competition;


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