Supermodularity and Risk Aversion

John Quiggin and Robert Chambers ()

No WPR04_2, Risk & Uncertainty Working Papers from Risk and Sustainable Management Group, University of Queensland

Abstract: In this paper, we consider the relationship between supermodularity and risk aversion. We show that supermodularity of the certainty equivalent implies that the certainty equivalent of any random variable is less than its mean. We also derive conditions under which supermodularity of the certainty equivalent is equivalent to aversion to mean-preserving spreads in the sense of Rothschild and Stiglitz.

Keywords: risk aversion; Schur concavity; supermodularity (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2004-03
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http://www.uq.edu.au/rsmg/WP/WPR04_2.pdf (application/pdf)

Related works:
Journal Article: Supermodularity and risk aversion (2006)
Working Paper: Supermodularity and Risk Aversion (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:rsm:riskun:r04_2

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