On the Effect of Risk Aversion in Two-Person, Two-State Finance Economies
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.
Year of publication: |
2008
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Authors: | Caroline, Berden ; Hans, Peters |
Published in: |
The B.E. Journal of Theoretical Economics. - De Gruyter, ISSN 1935-1704. - Vol. 7.2008, 1, p. 1-18
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Publisher: |
De Gruyter |
Saved in:
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