New Results for Additive and Multiplicative Risk Apportionment

Henri Loubergé, Yannick Malevergne and Béatrice Rey ()
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Béatrice Rey: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique

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Abstract: We start by pointing out a simple property of risk apportionment with additive risks in the general stochastic dominance context defined by Eeckhoudt et al. (2009b). Quite generally, an observed preference for risk apportionment with additive risks in a specific risk environment is preserved when the decision-maker is confronted to other risk situations, so long as the total order of stochastic dominance relationships among pairs of risks remains the same. Our objective is to check whether this simple property also holds for multiplicative risk environments. We show that this is not the case, in general, but that the property holds and more strongly for the case of CRRA utility functions. This is due to a particular feature of CRRA functions that we unveil.

Keywords: Additive risks; Constant relative risk aversion; Multiplicative risks; Preserved preference ranking; Risk apportionment (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-rmg and nep-upt
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Related works:
Journal Article: New Results for additive and multiplicative risk apportionment (2020)
Working Paper: New Results for additive and multiplicative risk apportionment (2020)
Working Paper: New Results for Additive and Multiplicative Risk Apportionment (2019)
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