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Production decisions based on absolute vs. relative risk aversion and their extensions

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  • Grubbström, Robert W.

Abstract

In this paper we compare the two basic risk preference measures suggested independently by John W. Pratt (1964) and Kenneth J. Arrow (1965) as to their impact on simple production decisions with uncertain economic outcomes. We develop a further related concept by introducing a risk aversion leverage measuring the dependence of absolute risk aversion on wealth.

Suggested Citation

  • Grubbström, Robert W., 2021. "Production decisions based on absolute vs. relative risk aversion and their extensions," International Journal of Production Economics, Elsevier, vol. 234(C).
    • Handle: RePEc:eee:proeco:v:234:y:2021:i:c:s0925527321000128
    DOI: 10.1016/j.ijpe.2021.108036
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    References listed on IDEAS

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