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On relative and partial risk attitudes: theory and implications

Economic Theory volume 50, pages 151–167 (2012)Cite this article

Abstract

This paper develops context-free interpretations for the relative and partial Nth degree risk attitude measures and show that various conditions on theses measures are utility characterizations of the effects of scaling general stochastic changes in different settings. It is then shown that these characterizations can be applied to generalize comparative statics results in a number of important problems, including precautionary savings, optimal portfolio choice, and competitive firms under price uncertainty.

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Authors and Affiliations

  1. Department of Economics, School of Social Sciences, University of Manchester, Manchester, M13 9PL, UK

    W. Henry Chiu

  2. IESEG School of Management, LEM, Lille, France

    Louis Eeckhoudt

  3. CORE, 34 Voie du Roman Pays, Louvain-la-Neuve, 1348, Belgium

    Louis Eeckhoudt

  4. Université de Lyon, Université Lyon 1, LSAF, Lyon, France

    Beatrice Rey

Authors
  1. W. Henry Chiu
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  2. Louis Eeckhoudt
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  3. Beatrice Rey
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Corresponding author

Correspondence to W. Henry Chiu.

Additional information

We are grateful to an anonymous referee for very helpful comments on earlier drafts of this paper.

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Chiu, W.H., Eeckhoudt, L. & Rey, B. On relative and partial risk attitudes: theory and implications. Econ Theory 50, 151–167 (2012). https://doi.org/10.1007/s00199-010-0557-7

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  • DOI: https://doi.org/10.1007/s00199-010-0557-7

Keywords

  • Nth degree risk
  • Stochastic dominance
  • Relative risk aversion
  • Comparative statics
  • Risk apportionment

JEL Classification

  • D81