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New characterizations of increasing risk

David P. Brown

Journal of Mathematical Economics, 2017, vol. 69, issue C, 7-11

Abstract: 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)
Date: 2017
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