Risk vulnerability: a graphical interpretation

Eeckhoudt, Louis;Rey, Béatrice
(2011) Theory and Decision : an international journal for multidisciplinary advances in decision sciences — Vol. 71, n° 2, p. 227-234 (2011)

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Authors
  • Eeckhoudt, LouisIESEG School of Management
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  • Rey, BéatriceUniversité Lyon 1
    Author
Abstract
The article gives a graphical interpretation of the concept of risk vulnerability. It shows that in a specific context of binary lotteries the assumption of risk vulnerability adds to prudence what the assumption of decreasing absolute risk aversion adds to risk aversion. We end the presentation showing that results can be extended to the concept of multiplicative risk vulnerability.
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Eeckhoudt, L., & Rey, B. (2011). Risk vulnerability: a graphical interpretation. Theory and Decision : an international journal for multidisciplinary advances in decision sciences, 71(2), 227-234. https://doi.org/10.1007/s11238-009-9173-z (Original work published 2011)