Skewness preferences—preferences toward low-probability, high-impact risks—are crucial determinants of economic behavior. This paper defines first- and higher-order skewness preferences and shows that the order of skewness preference captures the importance of skewness relative to mean and...

Prudence is widely known for inducing precautionary saving behavior. This paper revisits this important implication by introducing the notions of first-order and second-order prudence. Within smooth expected utility (EU), prudence is second-order. In that case, the presence of a small,...

This online appendix (OA) contains proofs and additional results to the paper Ebert and Karehnke (2021) “Skewness Preferences in Choice under Risk.” Online Appendix OA.1 shows the proofs of the results in the main text. Online Appendix OA.2 studies behavioral implications of the orders of...

Many of the most significant risks that people face in their lives are left-skewed, i.e., imply large losses with only small probability. I characterize skewness in binary risks, which are widely applied in both economic models and experiments. Moreover, I provide an explicit re-parametrization...

I give a counterexample to statements in Crainich, Eeckhoudt and Trannoy (AER, forthcoming) that shows that risk lovers may be imprudent. It stems from the fact that risk loving may not come along with mixed risk loving — as is typical for risk aversion and mixed risk aversion — and thus...