Comparative Risk Apportionment Paper Published In Economic Theory Bulletin
Mar 26, 2021
Summary: The PERC working paper, "Comparative Risk Apportionment,"has been published in the April Issue of Economic Theory Bulletin
Previous studies have shown that a decision maker who would rather apportion an independent risk in a state with a good lottery than in a state with a bad lottery is said to have a preference for risk apportionment. In this paper, PERC Research Scientist Liqun Liu and coauthors Paan Jindapon and William S. Neilson propose a measure for the strength of nth-degree risk apportionment preference based on Pratt’s probability premium (Pratt, 1964). Under expected utility theory, the authors analyze the relationship between a greater preference for risk apportionment and both the Ross and Arrow-Pratt versions of comparative risk aversion.
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The full working paper can be found in PERC's publication library.