 Aversion to One Risk in the Presence of OthersJohn W Pratt Journal of Risk and Uncertainty, 1988, vol. 1, issue 4, 395-413 Abstract: The more risk-averse of two individuals need not have the smaller certainty equivalent for a risk (x" tilda") if another risk or combination of risks (w" tilda") is present. It is shown that he must, however, if either individual's conditional certainty equivalent for (x" tilda") is increasing in w. For independent risks, this condition follows immediately if either individual is decreasingly risk-averse, giving a natural proof of a known result. Another short proof of this result and necessary and sufficient conditions in the independent case are given. For multivariate utilities, the corresponding results do not hold, but it is proved simply that any mixture of decreasingly risk-averse utilities is decreasingly risk-averse. Also touched upon are risk aversion's relation to generalized means, concave composition, risk sharing, and interest rates, the application of the results to discounting under uncertainty and selection of investment level, and their connection to singly crossing distributions, noise, and dominance. Copyright 1988 by Kluwer Academic Publishers Date: 1988 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:kap:jrisku:v:1:y:1988:i:4:p:395-413 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Risk and Uncertainty is currently edited by W. Kip Viscusi More articles in Journal of Risk and Uncertainty from Springer |
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