Ross risk vulnerability for introductions and changes in background risk

B-Tier
Journal: Journal of Mathematical Economics
Year: 2012
Volume: 48
Issue: 4
Pages: 197-206

Authors (2)

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We present two theorems that provide necessary and sufficient conditions for an expected utility maximizer to become more risk averse in the sense of Ross with respect to bearing a foreground risk after the introduction of any independent fair or unfair additive background risk. We call these decision makers Ross risk vulnerable, and show that Ross decreasing absolute risk aversion and Ross decreasing absolute prudence are jointly sufficient for Ross risk vulnerability. Restrictions on utility necessary and sufficient for Ross risk vulnerability with respect to stochastic dominance deteriorations of an existing background risk are also presented. Our analysis concludes with applications of Ross risk vulnerability.

Technical Details

RePEc Handle
repec:eee:mateco:v:48:y:2012:i:4:p:197-206
Journal Field
Theory
Author Count
2
Added to Database
2026-01-25