Convex and decreasing absolute risk aversion is proper

Proper risk aversion, a pivotal concept in the study of behavioral conditions on utility functions, states that an undesirable risk can never be made desirable by the presence of an independent risk. It is well known that standard risk aversion is sufficient for this concept. We show in this short article that convex and decreasing absolute risk aversion is an alternative sufficient condition.

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Year of publication:	2014
Authors:	Huang, James
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 125.2014, 1, p. 123-125
Publisher:	Elsevier
Subject:	Proper risk aversion \| Convex absolute risk aversion \| Background risk

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Type of publication:	Article
Classification:	D81 - Criteria for Decision-Making under Risk and Uncertainty
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010939507