Willingness to Pay for Risk Reduction and Risk Aversion without the Expected Utility Assumption

Eric Langlais

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Abstract: By means of minimal assumptions on the individual preferences, I show that the Willingness To Pay (WTP) for both a FSD and SSD reduction of risk is the sum of a mean effect, a pure risk effect and a wealth effect. As a result, the WTP of a risk-averse decision maker may be lower than the WTP of a risk-neutral one, for a large class of individual preferences' representation and a large class of risks.

Keywords: Risk premium; Willingness to pay; First and second stochastic dominance shifts in risk (search for similar items in EconPapers)
Date: 2005-08
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Citations: View citations in EconPapers (15)

Published in Theory and Decision, 2005, 59, pp.43-50. ⟨10.1007/s11238-005-7303-9⟩

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Journal Article: Willingness to Pay for Risk Reduction and Risk Aversion without the Expected Utility Assumption (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00279144

DOI: 10.1007/s11238-005-7303-9

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