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

Hongxia WANG; Jianli WANG; Ho Yin Martin YICK

doi:10.1016/j.econlet.2018.04.005

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

Department of Finance and Insurance

Research output: Journal Publications › Journal Article (refereed) › peer-review

2 Citations (Scopus)

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 language	English
Pages (from-to)	52-55
Number of pages	4
Journal	Economics Letters
Volume	168
Early online date	11 Apr 2018
DOIs	https://doi.org/10.1016/j.econlet.2018.04.005
Publication status	Published - 1 Jul 2018

Funding

The authors would like to thank the editor and an anonymous referee for their helpful comments and suggestions. This work is supported by the National Natural Science Foundation of China with grant numbers 71401074, 71231005, the Fundamental Research Funds for the Central Universities under Research Project No. NS2018048.

Keywords

Ross risk aversion
Saving
Self-protection
Stochastic dominance

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10.1016/j.econlet.2018.04.005

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.",

keywords = "Ross risk aversion, Saving, Self-protection, Stochastic dominance",

author = "Hongxia WANG and Jianli WANG and YICK, {Ho Yin Martin}",

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doi = "10.1016/j.econlet.2018.04.005",

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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

PY - 2018/7/1

Y1 - 2018/7/1

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

UR - http://www.scopus.com/inward/record.url?scp=85045409438&partnerID=8YFLogxK

U2 - 10.1016/j.econlet.2018.04.005

DO - 10.1016/j.econlet.2018.04.005

M3 - Journal Article (refereed)

AN - SCOPUS:85045409438

SN - 0165-1765

VL - 168

SP - 52

EP - 55

JO - Economics Letters

JF - Economics Letters

ER -

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

Abstract

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Keywords

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