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The values of relative risk aversion and prudence: A context-free interpretation

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  • EECKHOUDT, Louis
  • ETNER, Johanna
  • SCHROYEN, Fred

Abstract

In this paper we apply to multiplicative lotteries the idea of preference for "harm disaggregation" that was used for additive lotteries in order to interpret the signs of successive derivatives of a utility function. In this way, we can explain in general terms why the values of the coefficients of relative risk aversion and relative prudence are usually compared respectively to 1 and 2. We also show how these values partition the sets of risk averse and/or prudent decision makers into two subgroups.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • EECKHOUDT, Louis & ETNER, Johanna & SCHROYEN, Fred, 2009. "The values of relative risk aversion and prudence: A context-free interpretation," LIDAM Reprints CORE 2162, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2162
    DOI: 10.1016/j.mathsocsci.2008.09.007
    Note: In : Mathematical Social Sciences, 58, 1-7, 2009
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    References listed on IDEAS

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