Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Convex and decreasing absolute risk aversion is proper
AU - Huang, James
PY - 2014/10
Y1 - 2014/10
N2 - Proper risk aversion, a pivotal concept in the study of behavioral conditions on utility functions, states that an undesirable risk can never be made desirable by the presence of an independent risk. It is well known that standard risk aversion is sufficient for this concept. We show in this short article that convex and decreasing absolute risk aversion is an alternative sufficient condition.
AB - Proper risk aversion, a pivotal concept in the study of behavioral conditions on utility functions, states that an undesirable risk can never be made desirable by the presence of an independent risk. It is well known that standard risk aversion is sufficient for this concept. We show in this short article that convex and decreasing absolute risk aversion is an alternative sufficient condition.
KW - Proper risk aversion
KW - convex absolute risk aversion
KW - background risk
U2 - 10.1016/j.econlet.2014.07.007
DO - 10.1016/j.econlet.2014.07.007
M3 - Journal article
VL - 125
SP - 123
EP - 125
JO - Economics Letters
JF - Economics Letters
SN - 0165-1765
IS - 1
ER -