# Questions tagged [risk-aversion]

A property of preferences that causes an agent to prefer alternatives whose outcomes are relatively certain, even when the associated expected payoff is lower.

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### Constant relative risk aversion for wealth spanning from negative to positive

I am modeling scenarios that could involve wealth for all real numbers and I am assuming constant relative risk aversion. I need to model the scenarios for different risk aversion levels, but I can't ...
1 vote
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### risk aversion and the law of diminishing marginal utility

I see many plots where x is wealth and y is utility. If a person is risk averse, he has a concave line on the plot. If the person is risk neutral, her line on the plot is straight. On the other hand, ...
1 vote
43 views

### Risk Premium for Prospect Theory-like value function

I am curious how to calculate the following risk premium for a utility function that is not linear in $w$. What i'm asking is the following: Consider an agent with utility function $u$, initial wealth ...
1 vote
3 views

### Finding the risk attitude parameter in a CPT Risk Elicitation Model

I'm working with this article by Bauermeister et al. that compares the risk attitude parameters found using two different risk elicitation models. The models each use a series of gambling options to ...
104 views

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### Construct utility function for a risk-averse agent

I am trying to construct utility function for an agent who can be risk-seeking or risk-averse. We have an agent $i$ who has an ideal point $x$ in a policy space $X = [0,1]$. There is a policy (option) ...
170 views

### Relative risk aversion, a property of period or lifetime utility

This question is to be understood in the context of consumption based asset pricing. I'm wondering whether relative risk aversion is a property of the period utility function, which is simply a ...
70 views

### Value of Statistical Life and Risk

I have been reading a paper by Bove & Elia (2011), where they quote a definition of the value of statistical life from Bellavance, Dionne & Lebeau (2009). I have tried making my peace with the ...
492 views

### Why is the Marginal Utility of losses deminishing in Prospect Theory?

This is Kahneman's value-plot on prospect theory: QUESTION: Why is the Marginal Utility of losses deminishing? CONTEXT: I fully understand that the Marginal Utility of gains deminishes: 100 dollar ...
292 views

### a risk lover agent preferences and the preference of risk natural agent may be the same

Consider two lotteries $N$ and $M$. Agent $i$ is risk-averse and prefers $N$. Agent $j$ is risk-neutral and prefers $M$. Would any risk-loving agent $k$ also prefer $M$? That is, would $j$ and $k$ ...
89 views

### Entrepreneurs and risk aversion

The are various opinion whether entrepreneurs are more or less risk-averse than the general population. The commonly held belief is that they are less so, but the contrary opinion exists as well. ...
119 views

### Is there a natural intuitive interpretation of the **numerical value** of the coefficients of risk aversion?

We can write down the coefficient of absolute risk aversion $R_a$, or the coefficient of relative risk aversion $R_r$. Are there intuitive interpretations of the numerical values of these ...