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Decisions involving risk are usually taken in the presence of other insurable or non-insurable risks, the latter type called background risk. We examine how changing background risk influences risk-taking based on panel data with monthly observations from Senegalese fishermen. Fishing income is...
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'convex-cost effect' and the 'gambling effect'. We apply the analysis to the Baltic cod and the North Sea herring fisheries …
Persistent link: https://www.econbiz.de/10009625696
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We study optimal harvesting of a renewable resource with stochastic dynamics. To focus on the effect of risk aversion, we consider a resource user who is indifferent with respect to intertemporal variability. We find that a constant escapement strategy is optimal, i.e. the stock after harvesting...
Persistent link: https://www.econbiz.de/10014081862
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This paper compares Bayesian decision theory with robust decision theory where the decision maker optimizes with respect to the worst state realization. For a class of robust decision problems there exists a sequence of Bayesian decision problems whose solution converges towards the robust...
Persistent link: https://www.econbiz.de/10009765345
Optimal portfolio rules are derived under uncertainty aversion by formulating the portfolio choice problem as a robust control problem. The robust portfolio rule indicates that the total holdings of risky assets as a proportion of the investor's wealth could increase as compared to the holdings...
Persistent link: https://www.econbiz.de/10011602543
We formalize the notion of monotonicity with respect to first-order stochastic dominance in the context of preferences defined over the set of temporal lotteries. It is shown that the only Kreps and Porteus (1978) preferences which are both stationary and monotone are Uzawa preferences and...
Persistent link: https://www.econbiz.de/10013035912
We formalize the notion of monotonicity with respect to first-order stochastic dominance in the context of preferences defined over the set of temporal lotteries. It is shown that the only Kreps and Porteus (1978) preferences which are both stationary and monotone are Uzawa preferences and...
Persistent link: https://www.econbiz.de/10013036024