Monotone Risk Aversion

Lars Nielsen

Chapter 17 in Institutions, Equilibria and Efficiency, 2006, pp 317-329 from Springer

Abstract: Summary This paper defines decreasing absolute risk aversion in purely behavioral terms without any assumption of differentiability and shows that a strictly increasing and risk averse utility function with decreasing absolute risk aversion is necessarily differentiable with an absolutely continuous derivative. A risk averse utility function has decreasing absolute risk aversion if and only if it has a decreasing absolute risk aversion density, and if and only if the cumulative absolute risk aversion function is increasing and concave. This leads to a characterization of all such utility functions. Analogues of these results also hold for increasing absolute and for increasing and decreasing relative risk aversion.

Keywords: Absolute risk aversion; Relative risk aversion; Decreasing risk aversion; Increasing risk aversion; Cumulative absolute risk aversion; Cumulative relative risk aversion (search for similar items in EconPapers)
Date: 2006
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Related works:
Journal Article: Monotone risk aversion (2005)
Working Paper: Monotone Risk Aversion (2003)
Working Paper: Monotone Risk Aversion (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:steccp:978-3-540-28161-0_17

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DOI: 10.1007/3-540-28161-4_17

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