Abstract
AbstractAttitudes towards multidimensional risk depend both on the shape of the indifference map under certainty and on the degree of concavity of the utility function representing preferences under risk. A decomposition of the risk premium is built on the new notion of “compensated risk aversion”. The balance between the two components is shown to depend on the association of the risks. Several applications are also presented, including the intertemporal model.
Publisher
Springer Science and Business Media LLC
Subject
Management Science and Operations Research,General Decision Sciences
Reference41 articles.
1. Aaberge, R., & Brandolini, A. (2015). Multidimensional poverty and inequality. In A. B. Atkinson & F. Bourguignon (Eds.), Handbook of Income Distribution, 2 (pp. 141–216). Amsterdam: Elsevier.
2. Adler, M. (2012). Well-being and fair distribution: Beyond cost-benefit analysis Oxford University Press, 634 pages.
3. Apps, P., Andrienko, Y., & Rees, R. (2014). Risk and precautionary saving in two-person households. The American Economic Review, 104, 1040–1046.
4. Bell, D. E., & Raiffa, H. (1979). Marginal value and intrinsic risk aversion. In Bell, D. E., Raiffa, H., Tversky, A., eds. Decision making. Descriptive, normative and prescriptive interactions. (Cambridge University Press, 1988) 384–397.
5. Boland, P. J., & Proschan, F. (1988). Multivariate arrangement increasing functions with applications in probability and statistics. Journal of Multivariate Analysis, 25–2, 286–298.