ANOTHER TYPE OF RISK AVERSION
Abstract
A formulation is made incorporating the concept of 'size-of-risk' aversion into the process of selecting a utility function. This concept extends and complements normative observation of risk aversion, namely, that as wealth increases, many decisionmakers would feel that they ought to pay less insurance against a given risk. However, as the size of potential loss increases, decisionmakers are more averse to risk and would be willing to pay a larger premium. They display what is known as (positive) size-of-risk aversion. In selecting a utility function, both concepts should be considered.
Document Details
- Document Type
- Technical Report
- Publication Date
- May 01, 1969
- Accession Number
- AD0689154
Entities
People
- Emmett Keeler
- Richard Zeckhauser
Organizations
- RAND Corporation