Prudence, temperance, edginess, and risk apportionment as decreasing sensitivity to detrimental changes

Michel Denuit and Beatrice Rey ()

Mathematical Social Sciences, 2010, vol. 60, issue 2, 137-143

Abstract: This paper shows that the notions of prudence, temperance, edginess, and, more generally, risk apportionment of any degree are the consequences of the natural idea that the sensitivity to detrimental changes should decrease with initial wealth. In the setting of Epstein and Tanny (1980), this turns out to be equivalent to the supermodularity of the expected utility for some specific 4-state lotteries.

Keywords: Expected; utility; Wealth; effect; Supermodularity; Stochastic; dominance (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:60:y:2010:i:2:p:137-143

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