ISSN:
1573-0476
Keywords:
risk
;
uncertainty
;
mean-preserving spreads
;
star-shape
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Abstract A characterization of comparative risk, parallel to but more restrictive than the Rothschild-Stiglitz (1970) characterization, is developed. As in Rothschild and Stiglitz, we develop a four-way characterization that consists of generating processes (a noise condition and generation by a sequence of special mean-preserving spreads), integral conditions, and preferences. The building blocks of this new order, Mean-preserving increases in risk about ν, where ν is any constant, are mean-preserving spreads whose centers have a nonempty intersection. If this intersection contains the mean of the distribution, the induced order, or mean-preserving increase in risk about the mean, conveys a particularly meaningful notion of an increase in risk as a buildup of the tails of the distribution.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1007/BF00213261
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