2 research outputs found
New results on the relationship among risk aversion, prudence and temperance
This note studies the relationships between different aspects of agent’s preferences toward risk. We show
that, under the assumptions of non-satiation and bounded marginal utility, prudence implies risk aversion
(imprudence implies risk loving) and that temperance implies prudence (intemperance implies
imprudence). The implications of these results for comparing risks in the cases of increase in risk, increase
in downside risk and increase in outer risk are discussed