Restricted increases in risk aversion and their application

Louis Eeckhoudt (1) , Liqun Liu , Jack Meyer

1 LEM - Lille économie management - UMR 9221

This paper proposes additional definitions of what it means for one decision maker to be more risk averse than another. These definitions build on the strongly more risk averse definition presented by Ross (Econometrica 49:621–663, 1981). Using examples from portfolio choice, self-protection and insurance demand, it is shown that these definitions of increased risk aversion facilitate clear-cut comparative statics analysis in decision models where traditional concepts of increased risk aversion are insufficient.

Mots clés: Comparative risk aversion; Portfolio choice; Self-protection; Insurance demand

Domaines: Economies et finances

Louis Eeckhoudt, Liqun Liu, Jack Meyer. Restricted increases in risk aversion and their application. Economic Theory, 2016, 64 (1), pp.161--181. ⟨10.1007/s00199-016-0978-z⟩. ⟨hal-01533535⟩