Risk Aversion in the Small and in the Large. When Outcomes are Multidimensional

Martin Hellwig

No 2004_6, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: The paper discusses criteria for comparing risk aversion of decision makers when outcomes are multidimensional. A weak concept, ”commodity specific greater risk aversion”, is based on the comparison of risk premia paid in a specified commodity. A stronger concept, ”uniformly greater risk aversion” is based on the comparison of risk premia regardless of what commodities are used for payment. Neither concept presumes that von Neumann-Morgenstern utility functions are ordinally equivalent. Nonincreasing consumption specific risk aversion is shown to be sufficient to make randomization undesirable in an agency problem with hidden characteristics.

Keywords: Multidimensional Risks; Risk Aversion; Risk Premia; Randomization in Incentive Schemes (search for similar items in EconPapers)
JEL-codes: D81 D82 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2004-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://www.coll.mpg.de/pdf_dat/2004_06online.pdf (application/pdf)

Related works:
Working Paper: Risk aversion in the small and in the large when outcomes are multidimensional (2004)
Working Paper: Risk Aversion in the Small and in the Large When Outcomes Are Multidimensional (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2004_06

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