New results on the relationship among risk aversion, prudence and temperance

Mario Menegatti

European Journal of Operational Research, 2014, vol. 232, issue 3, 613-617

Abstract: This note studies the relationships between different aspects of agent’s preferences toward risk. We show that, under the assumptions of non-satiation and bounded marginal utility, prudence implies risk aversion (imprudence implies risk loving) and that temperance implies prudence (intemperance implies imprudence). The implications of these results for comparing risks in the cases of increase in risk, increase in downside risk and increase in outer risk are discussed.

Keywords: Utility theory; Decision analysis; Risk analysis; Risk aversion; Prudence; Temperance (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:232:y:2014:i:3:p:613-617

DOI: 10.1016/j.ejor.2013.08.003

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