Putting Risk in its Proper Place

Eeckhoudt, Louis;Schlesinger, Harris
(2006) The American Economic Review — Vol. 96 (2006)

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Authors
  • Eeckhoudt, LouisFUCaM
    Author
  • Schlesinger, Harris
    Author
Abstract
(en) This paper examines preferences toward particular classes of lottery pairs. We show how such concepts as prudence and temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expected-utility framework with differentiable utility, the direction of preference for a particular class of lottery pairs is equivalent to signing the nth derivative of the utility function. What makes our characterization appealing is its simplicity, which seems particularly amenable to experimentation.
Affiliations
  • Louvain School of ManagementAccounting & Finance

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Eeckhoudt, L., & Schlesinger, H. (2006). Putting Risk in its Proper Place. The American Economic Review, 96. https://hdl.handle.net/2078.5/36040 (Original work published 2006)