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Willingness to pay for stochastic improvements of future risk under different risk aversion

Hongxia Wang, Jianli Wang and Yick Ho Yin

Economics Letters, 2018, vol. 168, issue C, 52-55

Abstract: Within a general intertemporal decision-making framework, this work shows one individual with more kth-degree (k=2,…,n) Ross risk aversion always chooses more current paying to improve his future payoff distribution when such stochastic improvement satisfies the nth-degree mean-preserving stochastic dominance. Moreover, when stochastic improvement of the future payoff distribution is not mean-preserving, the notions of linearly(quadratically)-restricted more Ross risk aversion proposed by Eeckhoudt, Liu and Meyer (2017) can help provide a clear-cut comparative statics analysis.

Keywords: Ross risk aversion; Stochastic dominance; Self-protection; Saving (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2018
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