New Characterizations of Increasing Risk
Posted: 3 Dec 2016
Date Written: December 1, 2016
Abstract
I present alternative constructions of gambles with greater risk. Rothschild and Stiglitz (1970) demonstrate that gamble Y has greater risk than X when Y is equal in distribution to X Z, where Z is noise. Gambles called positive-upper-conditional-mean errors are introduced, and I show that Y has greater risk than X when Z is a PUCME and is not noise. Simple examples demonstrate that the set of PUCMEs is strictly greater than the set of gambles that are noise.
Keywords: increasing risk, risk aversion, concave utility, noise
JEL Classification: D81
Suggested Citation: Suggested Citation
Brown, David P., New Characterizations of Increasing Risk (December 1, 2016). Journal of Mathematical Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2879477
Do you have negative results from your research you’d like to share?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.