Supermodularity and risk aversion

J. Quiggin; Robert Chambers

doi:10.1016/j.mathsocsci.2006.05.002

Supermodularity and risk aversion

J. Quiggin, Robert Chambers

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

Abstract

In this paper, we consider the relationship between supermodularity and risk aversion. We show that supermodularity of the certainty equivalent implies that the certainty equivalent of any random variable is less than its mean. We also derive conditions under which supermodularity of the certainty equivalent is equivalent to aversion to mean-preserving spreads in the sense of Rothschild and Stiglitz. (c) 2006 Elsevier B.V. All rights reserved.

Original language	English
Pages (from-to)	1-14
Journal	Mathematical Social Sciences
Volume	52
DOIs	https://doi.org/10.1016/j.mathsocsci.2006.05.002
Publication status	Published - 2006

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10.1016/j.mathsocsci.2006.05.002

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title = "Supermodularity and risk aversion",

abstract = "In this paper, we consider the relationship between supermodularity and risk aversion. We show that supermodularity of the certainty equivalent implies that the certainty equivalent of any random variable is less than its mean. We also derive conditions under which supermodularity of the certainty equivalent is equivalent to aversion to mean-preserving spreads in the sense of Rothschild and Stiglitz. (c) 2006 Elsevier B.V. All rights reserved.",

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AB - In this paper, we consider the relationship between supermodularity and risk aversion. We show that supermodularity of the certainty equivalent implies that the certainty equivalent of any random variable is less than its mean. We also derive conditions under which supermodularity of the certainty equivalent is equivalent to aversion to mean-preserving spreads in the sense of Rothschild and Stiglitz. (c) 2006 Elsevier B.V. All rights reserved.

U2 - 10.1016/j.mathsocsci.2006.05.002

DO - 10.1016/j.mathsocsci.2006.05.002

M3 - Article

SN - 0165-4896

VL - 52

SP - 1

EP - 14

JO - Mathematical Social Sciences

JF - Mathematical Social Sciences

ER -

Supermodularity and risk aversion

Abstract

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