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Wiley InterScience | ||||||||
  EconomicaVolume 74 Issue 294, Pages 189 - 213 Published Online: 24 Aug 2006 © 2010 The London School of Economics and Political Science
Abstract | References | Full Text: HTML, PDF (Size: 208K) | Related Articles | Citation Tracking  Dual Approaches to the Analysis of Risk Aversion Copyright © The London School of Economics and Political Science 2006 ABSTRACTWe present a dual formulation of choice under uncertainty based on a few simple assumptions about preferences. It is shown that the additive separability restriction on preferences, key to expected-utility theory, can be dropped with little loss of analytic power for a broad class of choice problems. Dual risk premiums are characterized, and it is shown that placing various invariance restrictions on them leads naturally to generalizations of the concepts of CARA, CRRA, and LRT familiar from expected-utility theory. Each of these generalizations conforms to a notion of homotheticity. Final version received 19 January 2006. | 
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