Risk aversion in the small and in the large when outcomes are multidimensional

Martin Hellwig

No 04-22, Papers from Sonderforschungsbreich 504

Abstract: The paper discusses criteria for comparing risk aversion of decision makers when outcomes are multidimensional. A weak concept, "commodity specific greater risk aversion", is based on the comparison of risk premia paid in a specified commodity. A stronger concept, "uniformly greater risk aversion" is based on the comparison of risk premia regardless of what commodities are used for payment. Neither concept presumes that von Neumann-Morgenstern utility functions are ordinally equivalent. Nonincreasing consumption specific risk aversion is shown to be sufficient to make randomization undesirable in an agency problem with hidden characteristics.

Keywords: multidimensional risks; risk aversion; risk premia; randomization in incentive schemes (search for similar items in EconPapers)
JEL-codes: D81 D82 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (3)

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https://madoc.bib.uni-mannheim.de/2722/1/dp04_22.pdf

Related works:
Working Paper: Risk Aversion in the Small and in the Large. When Outcomes are Multidimensional (2004)
Working Paper: Risk Aversion in the Small and in the Large When Outcomes Are Multidimensional (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:mnh:spaper:2722

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