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    Rights statement: This is the author’s version of a work that was accepted for publication in Economics Letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economics Letters, 134, 2015 DOI: 10.1016/j.econlet.2015.06.004

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The utility premium of Friedman and Savage, comparative risk aversion, and comparative prudence

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<mark>Journal publication date</mark>09/2015
<mark>Journal</mark>Economics Letters
Volume134
Number of pages3
Pages (from-to)34-36
Publication statusPublished
Early online date12/06/15
Original languageEnglish

Abstract

We show that the utility premium of Friedman and Savage can be used to explain comparative risk aversion and comparative prudence. More precisely, we show that the greater the risk aversion measure, the greater a risk's utility premium normalized by the marginal utility and that the greater the prudence measure, the greater the utility premium for disaggregating a certain loss of wealth and a zero-mean risk normalized by the utility function's second derivative.

Bibliographic note

18 month embargo This is the author’s version of a work that was accepted for publication in Economics Letters. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economics Letters, 134, 2015 DOI: 10.1016/j.econlet.2015.06.004