Do entrepreneurs consider the risk of their business equity when making investment portfolio allocations? Many people compartmentalize different risks and consider them separately, called mental accounting. Alternatively, the risk substitution hypothesis suggests that entrepreneurs would offset...

This paper uses firm-level data from the Business Environment and Enterprise Performance Surveys to study the process of convergence of transition countries with developed market economies. The study focuses on competition and market structure, finance and the structure of lending to firms, and...

This paper examines the effects of risk aversion on compliance choices in markets for pollution control. A firm’s decision to be compliant or not is independent of its manager’s risk preference. However, noncompliant firms with risk averse managers will have lower violations than otherwise...

We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA) utility functions. We illustrate the consequences of this...

A random variable (RV) X is given aminimum selling price $$S_U \left( X \right):=\mathop {\sup }\limits_x \left\{ {x + EU\left( {X - x} \right)} \right\}$$ and amaximum buying price $$B_p \left( X \right):=\mathop {\inf }\limits_x \left\{ {x + EP\left( {X - x} \right)} \right\}$$ whereU(·)...