Consider a simple two-state risk with equal probabilities for the two states. In particular, assume that the random wealth variable dominates via ith-order stochastic dominance for i=M,N. We show that the 50-50 lottery dominates the lottery via (N+M)th-order stochastic dominance. The basic idea...

We re-examine the utility premium of Friedman-Savage [Friedman, Milton and Savage, Leonard J., "The Utility Analysis of Choices Involving Risk." Journal of Political Economy 56, 1948, pp. 279-304.]. This measure is useful in understanding risky choices. For instance its reaction to an increased...

This paper examines preferences toward particular classes of lottery pairs. We show how such concepts as prudence and temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expected-utility framework with differentiable utility, the...