We present two theorems that provide necessary and sufficient conditions for an expected utility maximizer to become more risk averse in the sense of Ross with respect to bearing a foreground risk after the introduction of any independent fair or unfair additive background risk. We call these...

We show in general that risky investments become more attractive asthe investment horizon (n) lengthens.Specifically, any investor's maximal expected utility directlyincreases with n, as well as the investor's willingness toallocate more capital to the risky assets if his optimal strategy...

This discussion paper led to a publication in the <A HREF="http://www.sciencedirect.com/science/article/pii/S0167268109000109">'Journal of Economic Behavior & Organization'</A>, 2009, 70(1-2), 374-388.<P> In this paper we analyze a large sample of individual responses to six lottery questions. Wederive a simultaneous estimate of risk aversion γ and the time preference discount...</p></a>

Given the possibility to modify the probability of a loss, will a profit-maximizing insurer engage in loss prevention or is it in his interest to increase the loss probability? This paper investigates this question. First, we calculate the expected profit maximizing loss probability within an...

The value of travel time plays an important role in cost benefit analysis of infrastructureprojects. However, the issue of uncertainty on travel times and the implications this has forestimations of travel time values has received much less attention in the literature. In thispaper we compare...

An expected utility based cost-benefit analysis is in general fragile to its distributional assumptions. We derive necessary and sufficient conditions on the utility function of the expected utility model to avoid this. The conditions ensure that expected (marginal) utility remains finite also...

This paper presents preference axiomatizations of expected utility for nonsimple lotteries while avoiding continuity constraints. We use results by Fishburn (1975), Wakker (1993), and Kopylov (2010) to generalize results by Delbaen et al. (2011). We explain the logical relations between these...

Aumann and Serrano (2008) introduce the index of riskiness to quantify the risk of a gamble. We discuss for which gambles this index of riskiness exists by considering the acceptance behavior of CARA-agents. Since for several relevant distributions riskiness is not defined, we suggest an...

This paper presents a general result on the random selection of an element from an ordered sequence of risks and uses this result to derive additive and cross risk apportionment. Preferences favoring an improvement of the sampling distribution in univariate or bivariate first-order stochastic...