Dual Moments and Risk Attitudes

Louis R. Eeckhoudt () and Roger Laeven
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Louis R. Eeckhoudt: IÉSEG School of Management, Catholic University of Lille, Lille 59000, France; Center for Operations Research and Econometrics, University of Louvain, 1348 Ottignies-Louvain-la-Neuve, Belgium

Operations Research, 2022, vol. 70, issue 3, 1330-1341

Abstract: In decision under risk, the primal moments of mean and variance play a central role to define the local index of absolute risk aversion. In this paper, we show that in the canonical nonexpected utility models provided by the dual theory and rank-dependent utility, dual moments have to be used instead of, or on par with, their primal counterparts to obtain an equivalent index of absolute risk aversion.

Keywords: Special Issue: Mathematical Models of Individual and Group Decision Making in Operations Research (in honor of Kenneth Arrow); risk premium; expected utility; dual theory; rank-dependent utility; local index; absolute risk aversion (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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http://dx.doi.org/10.1287/opre.2020.2040 (application/pdf)

Related works:
Working Paper: Dual Moments and Risk Attitudes (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:70:y:2022:i:3:p:1330-1341

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