On social preferences and the intensity of risk aversion

Oded Stark

No 273146, Discussion Papers from University of Bonn, Center for Development Research (ZEF)

Abstract: We study the relative risk aversion of an individual with particular social preferences: his wellbeing is influenced by his relative wealth, and by how concerned he is about having low relative wealth. Holding constant the individual’s absolute wealth, we obtain two results. First, if the individual’s level of concern about low relative wealth does not change, the individual becomes more risk averse when he rises in the wealth hierarchy. Second, if the individual’s level of concern about low relative wealth intensifies when he rises in the wealth hierarchy and if, in precise sense, this intensification is strong enough, then the individual becomes less risk averse: the individual’s desire to advance further in the wealth hierarchy is more important to him than possibly missing out on a better rank.

Keywords: Financial Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 29
Date: 2018-05-29
New Economics Papers: this item is included in nep-upt
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Related works:
Journal Article: On Social Preferences and the Intensity of Risk Aversion (2019)
Working Paper: On Social Preferences and the Intensity of Risk Aversion (2019)
Working Paper: On social preferences and the intensity of risk aversion (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ubzefd:273146

DOI: 10.22004/ag.econ.273146

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