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Economic Consequences of Nth-Degree Risk Increases and Nth-Degree Risk Attitudes

Nocetti, Diego; Napp, Clotilde; Jouini, Elyès (2012-05), Economic Consequences of Nth-Degree Risk Increases and Nth-Degree Risk Attitudes, 39th Seminar of the European Group of Risk and Insurance Economists (EGRIE), 2012-09, Palma de Mallorca, Espagne

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Type
Communication / Conférence
Date
2012-05
Conference title
39th Seminar of the European Group of Risk and Insurance Economists (EGRIE)
Conference date
2012-09
Conference city
Palma de Mallorca
Conference country
Espagne
Pages
24
Metadata
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Author(s)
Nocetti, Diego
Napp, Clotilde cc
Jouini, Elyès
Abstract (EN)
We study comparative statics of Nth-degree risk increases, as de ned by Ekern (1980), within a large class of problems that involve bidimensional payoffs and additive or multiplicative risks. We establish necessary and sufficient conditions for unambiguous impact of Nth-degree risk increases on optimal decision making. We develop a simple and intuitive approach to interpret these conditions : novel notions of directional Nth-degree risk aversion that are characterized via preferences over lotteries.
Subjects / Keywords
Decision making; Relative Risk Aversion
JEL
D81 - Criteria for Decision-Making under Risk and Uncertainty