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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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 - The utility premium of Friedman and Savage, comparative risk aversion, and comparative prudence
AU - Huang, James
AU - Stapleton, Richard
N1 - 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
PY - 2015/9
Y1 - 2015/9
N2 - 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.
AB - 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.
KW - utility premium
KW - comparative risk aversion
KW - comparative
U2 - 10.1016/j.econlet.2015.06.004
DO - 10.1016/j.econlet.2015.06.004
M3 - Journal article
VL - 134
SP - 34
EP - 36
JO - Economics Letters
JF - Economics Letters
SN - 0165-1765
ER -