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On temperance and risks spreading

Author

Listed:
  • Christophe Courbage

    (Geneva School of Business Administration (HES-SO), Switzerland)

  • Béatrice Rey

    (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France)

Abstract

This paper investigates the conditions for which spreading N independent and unfair risks provides the highest level of welfare than any other possible allocations of risks. It shows that such preferences do not require a higher order property than temperance. Results are also interpreted in terms of the property of superadditivity of the utility premium.

Suggested Citation

  • Christophe Courbage & Béatrice Rey, 2018. "On temperance and risks spreading," Working Papers 1828, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:1828
    as

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    File URL: ftp://ftp.gate.cnrs.fr/RePEc/2018/1828.pdf
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    References listed on IDEAS

    as
    1. Sebastian Ebert, 2013. "Even (Mixed) Risk Lovers Are Prudent: Comment," American Economic Review, American Economic Association, vol. 103(4), pages 1536-1537, June.
    2. Gollier, Christian, 1996. "Decreasing absolute prudence: Characterization and applications to second-best risk sharing," European Economic Review, Elsevier, vol. 40(9), pages 1799-1815, December.
    3. Gollier, Christian & Pratt, John W, 1996. "Risk Vulnerability and the Tempering Effect of Background Risk," Econometrica, Econometric Society, vol. 64(5), pages 1109-1123, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    temperance; risk spreading; superadditivity; utility premium;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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