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Mapping completely proper rationality

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  • A. Mantovi

Abstract

Maps of completely proper rationality are introduced so as to parametrize departure from CARA decisionmaking in terms of level effects, and deepen the link between risk aversion, prudence and higher order concepts in connection with the objective approach to riskiness set forth by Aumann and Serrano (2008). On conceptual grounds, the focus on complete orders on preferences aligns with a line of progress of the microeconomics of risk. On technical grounds, the analytical tractability of our maps may prove effective in building explicit closed form solutions for relevant measures (for instance, the utility premium) in expected utility theory, as well as in conveying transparent insights concerning the relevance of complete properness.

Suggested Citation

  • A. Mantovi, 2013. "Mapping completely proper rationality," Economics Department Working Papers 2013-EP01, Department of Economics, Parma University (Italy).
  • Handle: RePEc:par:dipeco:2013-ep01
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    References listed on IDEAS

    as
    1. Robert J. Aumann & Roberto Serrano, 2008. "An Economic Index of Riskiness," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 810-836, October.
    2. Louis Eeckhoudt & Harris Schlesinger, 2006. "Putting Risk in Its Proper Place," American Economic Review, American Economic Association, vol. 96(1), pages 280-289, March.
    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. Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-154, January.
    5. Bommier, Antoine & Chassagnon, Arnold & Le Grand, François, 2012. "Comparative risk aversion: A formal approach with applications to saving behavior," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1614-1641.
    6. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    7. Antoine Bommier & Arnold Chassagnon & François Le Grand, 2012. "Comparative risk aversion: A formal approach with applications to saving behavior," Post-Print halshs-00754583, HAL.
    8. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, November.
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    More about this item

    Keywords

    risk aversion; complete properness; level effects; riskiness;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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