, Volume 30, Issue 2, pp 337-362
Date: 11 Nov 2005

A contribution to duality theory, applied to the measurement of risk aversion

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Abstract

This paper determines the precise connection between the curvature properties of an objective function and the ray-curvature properties of its dual. When the objective function is interpreted as a Bernoulli or cardinal utility function, our results characterize the relationship between an agent’s attitude towards income risks and her attitude towards risks in the underlying consumption space. We obtain these results by developing and applying a number of representation theorems for concave functions.