The values of relative risk aversion and prudence: A context-free interpretation

Louis Eeckhoudt, Johanna Etner and Fred Schroyen

Mathematical Social Sciences, 2009, vol. 58, issue 1, 1-7

Abstract: In this paper we apply to multiplicative lotteries the idea of preference for "harm disaggregation" that was used for additive lotteries in order to interpret the signs of successive derivatives of a utility function. In this way, we can explain in general terms why the values of the coefficients of relative risk aversion and relative prudence are usually compared respectively to 1 and 2. We also show how these values partition the sets of risk averse and/or prudent decision makers into two subgroups.

Keywords: Relative; risk; aversion; Relative; prudence (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (36)

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Related works:
Working Paper: The values of relative risk aversion and prudence: A context-free interpretation (2009)
Working Paper: The values of relative risk aversion and prudence: a context-free interpretation (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:58:y:2009:i:1:p:1-7

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