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

Keywords

Ross risk aversion
Saving
Self-protection
Stochastic dominance

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10.1016/j.econlet.2018.04.005

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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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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

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

Keywords

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