A note on risky targets and effort
Kit Pong Wong
Insurance: Mathematics and Economics, 2017, vol. 73, issue C, 27-30
This note examines the effort choice problem of a decision maker (DM) who has to meet a target. The more the DM spends on effort, the more likely the target is reached. Besides the risk of missing the target despite his effort, the DM faces additional uncertainty in that both the target and the status quo are subject to exogenous shocks that are beyond the DM’s control. We consider two cases: the additive case in which the DM’s effort affects solely the likelihood of achieving the target, and the multiplicative case in which the DM’s effort also has direct effect on the target and the status quo. Using the theory of monotone comparative statics and risk apportionment, we derive sufficient conditions under which the DM spends more on effort when the target experiences an improvement in risk via higher-order stochastic dominance.
Keywords: Monotone comparative statics; Risk apportionment; Stochastic dominance; Effort; Risky targets (search for similar items in EconPapers)
JEL-codes: C61 D81 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:73:y:2017:i:c:p:27-30
Access Statistics for this article
Insurance: Mathematics and Economics is currently edited by R. Kaas, Hansjoerg Albrecher, M. J. Goovaerts and E. S. W. Shiu
More articles in Insurance: Mathematics and Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().