Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85108
Authors: 
Hellwig, Martin F.
Year of Publication: 
2004
Series/Report no.: 
Preprints of the Max Planck Institute for Research on Collective Goods 2004/6
Abstract: 
The paper discusses criteria for comparing risk aversion of decision makers when outcomes are multidimensional. A weak concept, ”commodity specific greater risk aversion”, is based on the comparison of risk premia paid in a specified commodity. A stronger concept, ”uniformly greater risk aversion” is based on the comparison of risk premia regardless of what commodities are used for payment. Neither concept presumes that von Neumann-Morgenstern utility functions are ordinally equivalent. Nonincreasing consumption specific risk aversion is shown to be sufficient to make randomization undesirable in an agency problem with hidden characteristics.
Subjects: 
Multidimensional Risks
Risk Aversion
Risk Premia
Randomization in Incentive Schemes
JEL: 
D81
D82
Document Type: 
Working Paper

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