On Marginal-Risk Behavior

Robert G. Chambers

American Journal of Agricultural Economics, 2016, vol. 98, issue 2, 406-421

Abstract: This paper examines marginal-risk behavior in a decision-theoretic setting that is sufficiently general to accommodate any decision-making model representable by a certainty equivalent. The analysis shows that risk aversion in its usual sense is a special case of marginal-risk aversion associated with mean-preserving changes in gambles. Thus, marginal-risk behavior and risk behavior are not inherently different. Rather, they manifest similar behavior evaluated at different gambles. The paradox of marginal-risk-loving risk averters arises from mixing definitions of an "increase in risk."

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:98:y:2016:i:2:p:406-421.

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