The values of relative risk aversion and prudence : a context-free interpretation
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http://hdl.handle.net/11250/166638Utgivelsesdato
2009-02Metadata
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- Working papers (SNF) [809]
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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.
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Working paper2008:38