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On risk aversion, classical demand theory, and KM preferences
| Content Provider | Semantic Scholar |
|---|---|
| Author | Mirman, Leonard J. Santugini, Marc |
| Copyright Year | 2011 |
| Abstract | Building on Kihlstrom and Mirman (Journal of Economic Theory, 8(3), 361–388, 1974)'s formulation of risk aversion in the case of multidimensional utility functions, we study the effect of risk aversion on optimal behavior in a general consumer's maximization problem under uncertainty. We completely characterize the relationship between changes in risk aversion and classical demand theory. We show that the effect of risk aversion on optimal behavior depends on the income and substitution effects. Moreover, the effect of risk aversion is determined not by the riskiness of the risky good, but rather the riskiness of the utility gamble associated with each decision. |
| Starting Page | 51 |
| Ending Page | 66 |
| Page Count | 16 |
| File Format | PDF HTM / HTML |
| DOI | 10.1007/s11166-014-9182-3 |
| Volume Number | 48 |
| Alternate Webpage(s) | http://www.cirpee.org/fileadmin/documents/Cahiers_2011/CIRPEE11-32.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
