On Marginal-Risk Behaviour

Robert G. Chambers

    Research output: Contribution to journalArticlepeer-review

    2 Citations (Scopus)

    Abstract

    This paper examines marginal-risk behavior in a decision-theoretic setting that is sufficiently general to accommodate any decision-making model representable by a certainty equivalent. The analysis shows that risk aversion in its usual sense is a special case of marginal-risk aversion associated with mean-preserving changes in gambles. Thus, marginal-risk behavior and risk behavior are not inherently different. Rather, they manifest similar behavior evaluated at different gambles. The paradox of marginal-risk-loving risk averters arises from mixing definitions of an "increase in risk." © The Author 2015. Published by Oxford University Press on behalf of the Agricultural and Applied Economics Association. All rights reserved.
    Original languageEnglish
    Pages (from-to)406-421
    Number of pages16
    JournalAmerican Journal of Agricultural Economics
    Volume98
    Issue number2
    DOIs
    Publication statusPublished - 1 Mar 2016

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