We study the comparative statics implications of mean-variance preferences for optimal portfolios. Specifically, we show that all risk-averse mean-variance investors raise their investment in a risky asset in response to a change in that asset's return distribution if and only if the change...

Analyses of risk-bearing often assume that agents face only one risk. Agents however usually face several risks and the interaction between them can affect the willingness to bear any one of them. We consider how the introduction of background risk affects the comparative statics predictions of...

This article investigates the preservation of multivariate expected utility comparative statics for "smooth" nonexpected utility representations. Specifically, we answer the following question: if an expected utility comparative statics property depends only on preferences over sure prospects,...

This article studies an agent's valuation of the right to trade in a complete contingent claims market. The proposed measure generalizes the Pratt(1964) risk premium, which captures the willingness to pay to replace a given risky wealth prospect with an actuarially equivalent, nonrisky wealth....

This article extends Karni's (1992) Utility Theory with Probability Dependent Outcome Valuation (UTP-DOV) to accommodate a wider set of preferences, and applies the new representation to a variety of decision problems under risk. First, we present a new, more general, axiomatization of UTPDOV...

This paper analyzes the effect of increases in risk aversion on a general consumer choice model with multiple sources of risk. Sufficient--and, in the two commodity case, necessary--conditions for a given demand function to increase (or decrease) with increased risk aversion are derived. These...

Willig (1976) argues that the change in consumer's surplus is often a good approximation to the willingness to pay for a price change: if the income elasticity of demand is small, or the price change is small, then the percentage error from using consumer's surplus is small. If the price of a...

Illegal tying often occurs when a monopolist jointly sells a product with a complementary requirement, also sold competitively. Along with selling the complement at its competi tive price, this paper shows that profit can increase when a monopoli st lets consumers bundle any amount of the...

Holding more of the riskless asset and insuring the risky asset are two ways to reduce portfolio risk. These methods can be employed jointly. As a result, the amount of insurance selected to indemnify against possible losses from holding a risky asset depends, in general, on the quantities of...

In this article, a general class of deterministic transformations that can be interpreted as changes in risk are identified. This provides a fourth characterization of a Rothschild-Stiglitz increase in risk. In addition, a particular subclass of these transformations, termed simple...