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Expected Utility, mu-sigma Preferences, and Linear Distribution Classes: A Further Result

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  • Sinn, Hans-Werner

Abstract

This article is an extension of Meyer and Sinn's results on the representation of arbitrary von Neumann-Morgenstern functions in "mu-delta" space when the probability distributions to be compared belong to linear distribution class. It shows that, when absolute risk aversion decreases, stays constant, or increases not too fast, an increase in "delta," given "mu," increases the indifference curve slope: increased riskiness increases the required marginal compensation for risk when risk is measured by the standard deviation of wealth or income. Copyright 1990 by Kluwer Academic Publishers

Suggested Citation

  • Sinn, Hans-Werner, 1990. "Expected Utility, mu-sigma Preferences, and Linear Distribution Classes: A Further Result," Journal of Risk and Uncertainty, Springer, vol. 3(3), pages 277-281, September.
    • Handle: RePEc:kap:jrisku:v:3:y:1990:i:3:p:277-81
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    Cited by:

    1. Thomas Eichner & Andreas Wagener, 2002. "Increases in Risk and the Welfare State," CESifo Working Paper Series 685, CESifo.
    2. Panu Poutvaara, 2006. "On the political economy of social security and public education," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 345-365, June.
    3. Riekhof, Marie-Catherine, 2019. "The insurance premium in the interest rates of interlinked loans in a small-scale fishery," Environment and Development Economics, Cambridge University Press, vol. 24(1), pages 87-112, February.
    4. Broll, Udo & Wong, Wing-Keung & Wu, Mojia, 2013. "Banking Firm and Two-Moment Decision Making," MPRA Paper 51687, University Library of Munich, Germany.
    5. Wing-Keung Wong & Chenghu Ma, 2008. "Preferences over location-scale family," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(1), pages 119-146, October.
    6. Samuel Bowles, 2000. "Globalization and Redistribution: Feasible Egalitarianism in a Competitive World," Working Papers wp34, Political Economy Research Institute, University of Massachusetts at Amherst.
    7. Stimmelmayr, Michael & Liberini, Federica & Russo, Antonio, 2015. "The Role of Toeholds and Capital Gain Taxes for Corporate Acquisition Strategies," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112926, Verein für Socialpolitik / German Economic Association.
    8. Broll, Udo & Egozcue, Martín & Wong, Wing-Keung & Zitikis, Ričardas, 2010. "Prospect theory and hedging risks," Dresden Discussion Paper Series in Economics 05/10, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    9. Chen, An & Li, Hong & Schultze, Mark B., 2023. "Optimal longevity risk transfer under asymmetric information," Economic Modelling, Elsevier, vol. 120(C).
    10. Wagener, Andreas, 2003. "Comparative statics under uncertainty: The case of mean-variance preferences," European Journal of Operational Research, Elsevier, vol. 151(1), pages 224-232, November.
    11. Torben Dall Schmidt, 2001. "Direct Investment, Economic Integration and the Welfare State: The Case of European Integration," ERSA conference papers ersa01p61, European Regional Science Association.
    12. Bird, Edward J., 2001. "Does the welfare state induce risk-taking?," Journal of Public Economics, Elsevier, vol. 80(3), pages 357-383, June.
    13. Wagener, Andreas, 2002. "Prudence and risk vulnerability in two-moment decision models," Economics Letters, Elsevier, vol. 74(2), pages 229-235, January.
    14. Alfred Endres & Cornelia Ohl, 2000. "Taxes versus quotas to limit global environmental risks: new insights into an old affair," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 3(4), pages 399-423, December.
    15. Thomas Eichner & Andreas Wagener, 2004. "Relative risk aversion, relative prudence and comparative statics under uncertainty: The case of (μ, σ)‐preferences," Bulletin of Economic Research, Wiley Blackwell, vol. 56(2), pages 159-170, April.
    16. Samuel Bowles & Herbert Gintis, 2000. "Risk Aversion, Insurance, and the Efficiency-Equality Tradeoff," UMASS Amherst Economics Working Papers 2000-03, University of Massachusetts Amherst, Department of Economics.
    17. Thomas Eichner & Andreas Wagener, 2004. "The Welfare State in a Changing Environment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(3), pages 313-331, May.
    18. Samuel Bowles, 2019. "Globalization versus redistribution? Egalitarian policies in a competitive world economy," Indian Economic Review, Springer, vol. 54(1), pages 89-112, December.
    19. Alfred Endres & Cornelia Ohl, 2000. "Taxes versus quotas to limit global environmental risks: new insights into an old affair," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 3(4), pages 399-423, December.

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