On the relationship between the reversed hazard rate and elasticity

Despite hazard and reversed hazard rates sharing a number of similar aspects, reversed hazard functions are far less frequently used. Understanding their meaning is not a simple task. The aim of this paper is to expand the usefulness of the reversed hazard function by relating it to other well-known concepts broadly used in economics: (linear or cumulative) rates of increase and elasticity. This will make it possible (i) to improve our understanding of the consequences of using a particular distribution and, in certain cases, (ii) to introduce our hypotheses and knowledge about the random process in a more meaningful and intuitive way, thus providing a means to achieving distributions that would otherwise be hardly imaginable or justifiable. Copyright Springer-Verlag 2014