Many good risks: An interpretation of multivariate risk and risk aversion without the Independence axiom

Simon Grant; Atsushi Kajii; Ben Polak

doi:10.1016/0022-0531(92)90086-W

Many good risks: An interpretation of multivariate risk and risk aversion without the Independence axiom

Simon Grant^*, Atsushi Kajii, Ben Polak

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

6 Citations (Scopus)

Abstract

What can be inferred, without assuming the Independence axiom, about an agent's preferences over many-good lotteries from knowledge that the agent is income risk averse? We show that income risk aversion corresponds to an intuitive substitution property of the many-good lottery preferences that is, itself, equivalent to a standard definition of many-good risk aversion. We apply our approach to derive some well-known results directly from our interpretation of income risk aversion and neutrality.

Original language	English
Pages (from-to)	338-351
Number of pages	14
Journal	Journal of Economic Theory
Volume	56
Issue number	2
DOIs	https://doi.org/10.1016/0022-0531(92)90086-W
Publication status	Published - Apr 1992
Externally published	Yes

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10.1016/0022-0531(92)90086-W

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AB - What can be inferred, without assuming the Independence axiom, about an agent's preferences over many-good lotteries from knowledge that the agent is income risk averse? We show that income risk aversion corresponds to an intuitive substitution property of the many-good lottery preferences that is, itself, equivalent to a standard definition of many-good risk aversion. We apply our approach to derive some well-known results directly from our interpretation of income risk aversion and neutrality.

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Many good risks: An interpretation of multivariate risk and risk aversion without the Independence axiom

Abstract

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