Supermodularity and Risk Aversion

In this paper, we consider the relationship between supermodularity and risk aversion. We show that supermodularity of the certainty equivalent implies that the certainty equivalent of any random variable is less than its mean. We also derive conditions under which supermodularity of the certainty equivalent is equivalent to aversion to mean-preserving spreads in the sense of Rothschild and Stiglitz.


Issue Date:
2004-03
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/151161
Total Pages:
21
JEL Codes:
D81
Series Statement:
Risk and Uncertainty Program
2/R04




 Record created 2017-04-01, last modified 2017-08-27

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