We study the representative consumer's risk attitude and efficient risk-sharing rules in a single-period, single-good economy in which consumers have homogeneous probabilistic beliefs but heterogeneous risk attitudes. We prove that if all consumers have convex absolute risk tolerance, so must...

In this paper we propose a new downside risk aversion measure, which is called cautiousness in the literature. Using a simple portfolio problem with a risk-free bond, a stock, and an option on the stock, we show that, an agent has higher cautiousness (i) if and only if she is always more likely...