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Economic Theory

, Volume 64, Issue 1, pp 161–181 | Cite as

Restricted increases in risk aversion and their application

  • Louis Eeckhoudt
  • Liqun Liu
  • Jack Meyer
Research Article

Abstract

This paper proposes additional definitions of what it means for one decision maker to be more risk averse than another. These definitions build on the strongly more risk averse definition presented by Ross (Econometrica 49:621–663, 1981). Using examples from portfolio choice, self-protection and insurance demand, it is shown that these definitions of increased risk aversion facilitate clear-cut comparative statics analysis in decision models where traditional concepts of increased risk aversion are insufficient.

Keywords

Comparative risk aversion Portfolio choice Self-protection Insurance demand 

JEL Classification

D81 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  1. 1.IESEG School of ManagementLEMLilleBelgium
  2. 2.CORE Universite Catholique de LouvainLouvain-la-NeuveBelgium
  3. 3.Private Enterprise Research CenterTexas A&M UniversityCollege StationUSA
  4. 4.Department of EconomicsMichigan State UniversityEast LansingUSA

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