IDEAS home Printed from https://ideas.repec.org/a/pal/genrir/v28y2003i2p161-172.html
   My bibliography  Save this article

Locally Greater Vulnerability to Background Risk

Author

Listed:
  • Donald C. Keenan

    (Department of Economics, University of Georgia, Athens, Georgia 30602, USA)

  • Arthur Snow

    (Department of Economics, University of Georgia, Athens, Georgia 30602, USA, e-mail: snow@terry.uga.edu)

Abstract

Willingness to take on risk is influenced by the presence of fair and unfair background risks for decision makers who are risk vulnerable as defined by Gollier and Pratt [1996], for these decision makers are more risk averse when they possess such an uninsurable background risk. We present an alternative derivation of the index of local vulnerability based on Diamond and Stiglitz [1974] compensated increases in risk, such that risk aversion increases with the introduction of any small fair background risk if and only if the index of local vulnerability is positive. We establish that the increase in risk aversion is greater for those who are more vulnerable as measured by the index of local vulnerability. The Geneva Papers on Risk and Insurance Theory (2003) 28, 161–172. doi:10.1023/A:1026344905367

Suggested Citation

  • Donald C. Keenan & Arthur Snow, 2003. "Locally Greater Vulnerability to Background Risk," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 28(2), pages 161-172, December.
    • Handle: RePEc:pal:genrir:v:28:y:2003:i:2:p:161-172
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/grir/journal/v28/n2/pdf/grir2003159a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/grir/journal/v28/n2/full/grir2003159a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Franke, Günter & Stapleton, Richard C. & Subrahmanyam, Marti G., 2005. "Incremental risk vulnerability," CoFE Discussion Papers 05/08, University of Konstanz, Center of Finance and Econometrics (CoFE).
    2. Liu, Liqun & Rettenmaier, Andrew J., 2007. "Effects of mortality risk on risk-taking behavior," Economics Letters, Elsevier, vol. 94(1), pages 49-55, January.
    3. Donald C., Rudow, 2005. "Preferences and Increased Risk Aversion under a General Framework of Stochastic Dominance," MPRA Paper 41191, University Library of Munich, Germany, revised 07 Jun 2005.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:genrir:v:28:y:2003:i:2:p:161-172. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.