Willingness to pay for stochastic improvements of future risk under different risk aversion

Hongxia WANG, Jianli WANG*, Ho Yin Martin YICK

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)

1 Scopus Citations

Abstract

Within a general intertemporal decision-making framework, this work shows one individual with more kth-degree (k=2,…,n) Ross risk aversion always chooses more current paying to improve his future payoff distribution when such stochastic improvement satisfies the nth-degree mean-preserving stochastic dominance. Moreover, when stochastic improvement of the future payoff distribution is not mean-preserving, the notions of linearly(quadratically)-restricted more Ross risk aversion proposed by Eeckhoudt, Liu and Meyer (2017) can help provide a clear-cut comparative statics analysis.

Original languageEnglish
Pages (from-to)52-55
Number of pages4
JournalEconomics Letters
Volume168
Early online date11 Apr 2018
DOIs
Publication statusPublished - 1 Jul 2018

Fingerprint

Willingness-to-pay
Risk aversion
Decision making
Stochastic dominance
Comparative static analysis

Keywords

  • Ross risk aversion
  • Saving
  • Self-protection
  • Stochastic dominance

Cite this

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title = "Willingness to pay for stochastic improvements of future risk under different risk aversion",
abstract = "Within a general intertemporal decision-making framework, this work shows one individual with more kth-degree (k=2,…,n) Ross risk aversion always chooses more current paying to improve his future payoff distribution when such stochastic improvement satisfies the nth-degree mean-preserving stochastic dominance. Moreover, when stochastic improvement of the future payoff distribution is not mean-preserving, the notions of linearly(quadratically)-restricted more Ross risk aversion proposed by Eeckhoudt, Liu and Meyer (2017) can help provide a clear-cut comparative statics analysis.",
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Willingness to pay for stochastic improvements of future risk under different risk aversion. / WANG, Hongxia; WANG, Jianli; YICK, Ho Yin Martin.

In: Economics Letters, Vol. 168, 01.07.2018, p. 52-55.

Research output: Journal PublicationsJournal Article (refereed)

TY - JOUR

T1 - Willingness to pay for stochastic improvements of future risk under different risk aversion

AU - WANG, Hongxia

AU - WANG, Jianli

AU - YICK, Ho Yin Martin

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N2 - Within a general intertemporal decision-making framework, this work shows one individual with more kth-degree (k=2,…,n) Ross risk aversion always chooses more current paying to improve his future payoff distribution when such stochastic improvement satisfies the nth-degree mean-preserving stochastic dominance. Moreover, when stochastic improvement of the future payoff distribution is not mean-preserving, the notions of linearly(quadratically)-restricted more Ross risk aversion proposed by Eeckhoudt, Liu and Meyer (2017) can help provide a clear-cut comparative statics analysis.

AB - Within a general intertemporal decision-making framework, this work shows one individual with more kth-degree (k=2,…,n) Ross risk aversion always chooses more current paying to improve his future payoff distribution when such stochastic improvement satisfies the nth-degree mean-preserving stochastic dominance. Moreover, when stochastic improvement of the future payoff distribution is not mean-preserving, the notions of linearly(quadratically)-restricted more Ross risk aversion proposed by Eeckhoudt, Liu and Meyer (2017) can help provide a clear-cut comparative statics analysis.

KW - Ross risk aversion

KW - Saving

KW - Self-protection

KW - Stochastic dominance

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