Playing it Safe: Actions Attractive to the Risk Averse

Marilyn Pease and Mark Whitmeyer

Papers from arXiv.org

Abstract: We introduce a way to compare actions in decision problems. One action is safer than another if the set of beliefs at which the decision-maker prefers the safer action expands as the decision-maker becomes more risk averse. We provide a full characterization of this relation, show that it is equivalent to robust conceptions of single-crossing and second-order stochastic dominance, and reveal that in monotone decision problems it totally orders the decision-maker's set of actions. We discuss applications to games, insurance, investment hedging, and security design.

Date: 2023-10, Revised 2026-02
New Economics Papers: this item is included in nep-gth, nep-mic and nep-rmg
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