The Effect of FSD Changes in Multiplicative Background Risk on Risk-taking Attitude
Risk and Insurance from EconWPA
In this paper, we consider the effect of First-degree Stochastic Dominance (FSD) changes in background multiplicative risk on the risk- taking attitude of a decision maker. First, we consider contractive FSD changes in background multiplicative risk and analyze the effect of these changes. Then, we consider general FSD changes in background multiplicative risk. Also, in the context of coinsurance, we determine the effect of simple FSD changes and Monotone Likelihood Ratio (MLR) changes in multiplicative background risk.
Keywords: FSD changes; Multiplicative background risk; risk-taking attitude (search for similar items in EconPapers)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpri:0506001
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