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Another tale of two tails: On characterizations of comparative risk

Author

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  • Alfred Mueller
Abstract
We characterize the classes of utility functions that are consistent with different notions of mean preserving spreads introduced in the literature. This gives rise to a unified approach and extension of some definitions of increasing risk, including the concepts of Rothschild and Stiglitz (1970) and Landsberger and Meilijson (1990a). The main idea is to restrict the possible mean preserving spreads to an arbitrary subset.

Suggested Citation

  • Alfred Mueller, 1996. "Another tale of two tails: On characterizations of comparative risk," Working Papers 025, Risk and Insurance Archive.
    • Handle: RePEc:wop:riskar:025
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    References listed on IDEAS

    as
    1. Ian Jewitt, 1989. "Choosing Between Risky Prospects: The Characterization of Comparative Statics Results, and Location Independent Risk," Management Science, INFORMS, vol. 35(1), pages 60-70, January.
    2. Michael Landsberger & Isaac Meilijson, 1994. "The Generating Process and an Extension of Jewitt's Location Independent Risk Concept," Management Science, INFORMS, vol. 40(5), pages 662-669, May.
    3. Diamond, Peter A. & Stiglitz, Joseph E., 1974. "Increases in risk and in risk aversion," Journal of Economic Theory, Elsevier, vol. 8(3), pages 337-360, July.
    4. Muller, Alfred, 1998. "Comparing risks with unbounded distributions," Journal of Mathematical Economics, Elsevier, vol. 30(2), pages 229-239, September.
    5. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    6. Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, vol. 3(1), pages 66-84, March.
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    Cited by:

    1. María Concepción López-Díaz & Miguel López-Díaz & Sergio Martínez-Fernández, 2018. "Stochastic orders to approach investments in condor financial derivatives," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 27(1), pages 122-146, March.

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