On the Effect of Risk Aversion in Two-Person Two-State Finance Economies

C. Berden; H.J.M. Peters

doi:10.2202/1935-1704.1394

On the Effect of Risk Aversion in Two-Person Two-State Finance Economies

C. Berden, H.J.M. Peters

Quantitative Economics

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

The effect of replacing an agent in a two-person two-state finance economy by a more risk averse agent is studied. It is established under which conditions the other agent benefits or looses in equilibrium from dealing with a more risk averse agent. If one agent becomes more risk averse, then the equilibrium allocation moves towards that agent's certainty line. Whether or not that is beneficial for the other agent depends on the location of the endowment point.

Original language	English
Number of pages	47
Journal	The Berkeley Electronic Journal of Theoretical Economics
Volume	7
Issue number	1
DOIs	https://doi.org/10.2202/1935-1704.1394
Publication status	Published - 1 Jan 2007

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10.2202/1935-1704.1394

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