Accounting for Different Uncertainties: Implications for Climate Investments?

Svenja Hector ()
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Svenja Hector: ETH Zurich, Switzerland

No 13/188, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: The paper clarifies the link between changes in risk aversion and the effect on the consumption discount rate. In a general framework that can cope with various forms of uncertainty, it is shown that the response of the consumption discount rate to a change in risk aversion depends on some fundamental properties of the considered uncertainties. The application of this general result to specific forms of uncertainty extends existing results to more general forms of risk and yields a new result on preference uncertainty.

Keywords: rate; risk aversion; Kreps-Porteus-Selden; risk-sensitive preferences; uncertain preferences; climate change (search for similar items in EconPapers)
JEL-codes: D81 H43 Q54 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2013-11
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