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Comparative Risk Aversion under Background Risks Revisited

Author

Listed:
  • Masamitsu Ohnishi

    () (Graduate School of Economics, Osaka University)

  • Yusuke Osaki

    () (JSPS Research Fellow)

Abstract

This note determines a sufficient condition on (von Neumann-Morgenstern) utility functions to preserve (reserve) comparative risk aversion under general background risks. Our condition is weaker than the one determined by Nachman (1982, Journal of Economic Theory). Nachman fs condition requires the monotonicity in the global sense, in other hand our condition only requires it in the local sense. And this generalization may make the condition on utility functions to hold the desirable property consisitent with the recent empirical observation.

Suggested Citation

  • Masamitsu Ohnishi & Yusuke Osaki, 2006. "Comparative Risk Aversion under Background Risks Revisited," Discussion Papers in Economics and Business 06-16, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:0616
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0616.pdf
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    Cited by:

    1. Osaki, Yusuke & Quiggin, John, 2007. "A Risk-neutral Characterization of Optimization and Pessimism and its Applications," Risk and Sustainable Management Group Working Papers 151180, University of Queensland, School of Economics.
    2. Osaki, Yusuke & Quiggin, John, 2008. "Stochastic dominance representation of optimistic belief: Theory and applications," Economics Letters, Elsevier, vol. 101(3), pages 275-278, December.

    More about this item

    Keywords

    Background risk; comparative risk aversion; single crossing condition.;

    JEL classification:

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

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