New characterizations of increasing risk
David P. Brown
Journal of Mathematical Economics, 2017, vol. 69, issue C, 7-11
I present alternative constructions of gambles with greater risk. Rothschild and Stiglitz (1970) demonstrate that gamble Y has greater risk than X when Y is equal in distribution to X+Z, where Z is noise. Gambles called positive-upper-conditional-mean errors are introduced, and I show that Y has greater risk than X when Z is a PUCME and is not noise. Simple examples demonstrate that the set of PUCMEs is strictly greater than the set of gambles that are noise.
Keywords: Increasing risk; Risk aversion; Concave utility; Noise (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:69:y:2017:i:c:p:7-11
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