Convex and decreasing absolute risk aversion is proper

James Huang

Economics Letters, 2014, vol. 125, issue 1, 123-125

Abstract: Proper risk aversion, a pivotal concept in the study of behavioral conditions on utility functions, states that an undesirable risk can never be made desirable by the presence of an independent risk. It is well known that standard risk aversion is sufficient for this concept. We show in this short article that convex and decreasing absolute risk aversion is an alternative sufficient condition.

Keywords: Proper risk aversion; Convex absolute risk aversion; Background risk (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:125:y:2014:i:1:p:123-125

DOI: 10.1016/j.econlet.2014.07.007

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