Putting Risk in its Proper Place

Louis Eeckhoudt and Harris Schlesinger

No 1462, CESifo Working Paper Series from CESifo

Abstract: This paper examines preferences towards particular classes of lottery pairs. We show how concepts such as prudence and temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expected-utility framework with differentiable utility, the direction of preference for a particular class of lottery pairs is equivalent to signing the nth derivative of the utility function. What makes our characterization appealing is its simplicity, which seems particularly amenable to experimentation.

Keywords: properness; prudence; risk apportionment; risk aversion; stochastic dominance; temperance; utility premium (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Putting Risk in Its Proper Place (2006)
Working Paper: Putting risk in its proper place (2006)
Working Paper: Putting risk in its proper place (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1462

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