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On the effect of risk aversion in two-person, two-state finance economies

Author

Listed:
  • Berden, C.

    (Quantitative Economics)

  • Peters, H.J.M.

    (Quantitative Economics)

Abstract

The effect of replacing an agent in a two-person two-state finance economy by a more risk averse agent is studied. It is established under which conditions the other agent benefits or looses in equilibrium from dealing with a more risk averse agent. If one agent becomes more risk averse, then the equilibrium allocation moves towards that agent's certainty line. Whether or not that is beneficial for the other agent depends on the location of the endowment point.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Berden, C. & Peters, H.J.M., 2006. "On the effect of risk aversion in two-person, two-state finance economies," Research Memorandum 011, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    • Handle: RePEc:unm:umamet:2006011
    DOI: 10.26481/umamet.2006011
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    References listed on IDEAS

    as
    1. Caroline Berden & Hans Peters, 2006. "On the Effect of Risk Aversion in Bimatrix Games," Theory and Decision, Springer, vol. 60(4), pages 359-370, June.
    2. Claus-Jochen Haake & Bettina Klaus, 2009. "Monotonicity and Nash implementation in matching markets with contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(3), pages 393-410, December.
    3. Kobberling, Veronika & Peters, Hans, 2003. "The effect of decision weights in bargaining problems," Journal of Economic Theory, Elsevier, vol. 110(1), pages 154-175, May.
    4. LeRoy,Stephen F. & Werner,Jan, 2014. "Principles of Financial Economics," Cambridge Books, Cambridge University Press, number 9781107024120, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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