Increase in risk and weaker marginal-payoff-weighted risk dominance
Journal
Journal of Risk and Insurance
Journal Volume
68
Journal Issue
2
Pages
329-338
Date Issued
2001
Author(s)
Abstract
This study investigates the comparative statics of an increase in risk for all risk-averse individuals with positive prudence. By extending the concept of risk dominance defined by Gollier (1995), this study provides the necessary and sufficient conditions-termed the weaker marginal-payoff-weighted risk dominance - of unambiguous comparative statics for all riskaverse individuals with positive prudence. The article further applies the concept of weaker marginal-payoff-weighted risk dominance to examine the relationship between an increase in risk and the demand for proportional insurance and to demonstrate the difference between Gollier's condition of risk dominance and weaker marginal-payoff-weighted risk dominance.
SDGs
Type
journal article