Changing risks and optimal effort

Abstract : Consider a decision maker who can engage in effort to increase the probability of facing a better risky situation. Intuition suggests that effort should increase when there is a greater difference between the best risky situation and the worse one. We show that this intuition is not necessarily valid and we consider the cases of risk averters and risk lovers.
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Submitted on : Tuesday, June 6, 2017 - 3:43:56 PM
Last modification on : Thursday, April 11, 2019 - 9:25:01 AM

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David Crainich, Louis Eeckhoudt, Mario Menegatti. Changing risks and optimal effort. Journal of Economic Behavior and Organization, Elsevier, 2016, 125, pp.97--106. ⟨10.1016/j.jebo.2016.01.009⟩. ⟨hal-01533522⟩

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