Income risk aversion with quantity constraints
Working paper
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Date
2010-02Metadata
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- Discussion papers (SAM) [655]
Abstract
In this paper, I consider a consumer with a concave utility
function over n commodities and trace out the consequences of quantity
constraints on product markets for the consumer's aversion towards income
risk. I show that the effect can be decomposed in a cardinal and ordinal
term, that both terms may add up to a non-linear effect on the coefficient
of relative risk aversion, and that a severely rationed consumer may even
become less risk averse then when unconstrained.
Publisher
Norwegian School of Economics and Business Administration. Department of EconomicsSeries
Discussion paper2010:8