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Changes in Risky Benefits and in Risky Costs : A Question of the Right Order

We organize and extend findings on the comparative static effects of risk changes on optimal behavior in a unifying expected utility model. We determine restrictions on preferences for clear-cut results. Risk increases of a benefit are compensated by lowering exposure to risk. For risk increases of a cost, the response depends on the order of the risk change. This discrepancy arises because even-order risk increases of a cost raise the riskiness of the payoff distribution, whereas odd-order risk increases of a cost reduce it. We identify the stochastic dominance orders to resolve this discrepancy and discuss specific decision problems as applications.

Ketersediaan

Informasi Detail

Judul Seri

MANAGEMENT SCIENCE; Vol.68 No.5 May 2022

No. Panggil

-

Penerbit

: .,

Deskripsi Fisik

p. 3625-3634

Bahasa

English

ISBN/ISSN

-

Klasifikasi

NONE

Tipe Isi

-

Tipe Media

-

Tipe Pembawa

-

Edisi

-

Subjek

DECISION MAKING
RISK AVERSION
STOCHASTIC DOMINANCE
COMPARATIVE STATICS
HIGHER-ORDER RISK

Info Detail Spesifik

https://doi.org/10.1287/mnsc.2021.4081

Pernyataan Tanggungjawab

Mario Menegatti, Richard Peter

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