Production decisions based on absolute vs. relative risk aversion and their extensions

Robert W. Grubbström

International Journal of Production Economics, 2021, vol. 234, issue C

Abstract: In this paper we compare the two basic risk preference measures suggested independently by John W. Pratt (1964) and Kenneth J. Arrow (1965) as to their impact on simple production decisions with uncertain economic outcomes. We develop a further related concept by introducing a risk aversion leverage measuring the dependence of absolute risk aversion on wealth.

Keywords: Risk aversion; Risk aversion leverage; Newsboy problem; Certainty monetary equivalent; Net present value; Internal risk aversion; Arrow-Pratt; CME; NPV; IRA (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527321000128
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:234:y:2021:i:c:s0925527321000128

DOI: 10.1016/j.ijpe.2021.108036

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().