Catastrophe aversion and risk equity are important concepts in both risk management theory and practice. Keeney (1980) was the first to formally define these concepts. He demonstrated that the two concepts are always in conflict. Yet this result is based on the assumption that individual risks are independent and has thus limited relevance for real world catastrophic events. We extend Keeney’s ...

Traditionally, risk aversion (both absolute and relative) has been expressed as a function of wealth alone. The characteristics of risk aversion as wealth changes have been extensively studied. However, prices, as well as wealth, enter the indirect utility function, from which the typical risk aversion measures are calculated. Given that, changes in prices will affect risk aversion, although ex...

We show that in large symmetric auctions with conditionally i.i.d. common values and CARA preferences, the second-price auction raises more revenue than the …rst-price auction. We also show by an example that the ranking does not extend to general symmetric risk-averse preferences.

This paper presents a theoretical and empirical analysis of the impact of financial assistance to farms on crop biodiversity in an uncertain setting. The findings reveal that risk aversion is an important driving force for crop biodiversity conservation. Riskaverse farmers can hedge against the uncertainty they face by allocating land to different crop species. However, policies intended to sta...

In this paper we conduct a series of field experiments in rural India in order to measure preferences related to risk, loss, and ambiguity. Disaggregating by data, we find that on average women are significantly more risk averse and loss averse than men, though the higher average risk aversion arises due to a greater share of women who are extremely risk averse. Through a series of two empirica...

We show that the production of information in financial markets is limited by the extent of risk sharing. The wider a stock’s investor base, the smaller the risk borne by each shareholder and the less valuable information. A firm which expands its investor base without raising capital affects its information environment through three channels: (i) it induces incumbent shareholders to reduce the...

It is well-known that pension fund participants can benefit from intergenerational risksharing, but that different generations have different incentives. This paper models intergenerational solidarity in closing funded pension plans as a bargaining process between generations. We consider generations which each are represented by members of the pension fund’s board. We model pension funds that ...

We consider a supply chain system with a risk-neutral manufacturer as the leader and a risk-averse retailer as the follower in the environment with uncertain demand. At the beginning of the game, the manufacturer makes investment on promotion effort and then the retailer decides his ordering quantity before demand realization. The analysis of equilibrium strategies of this Stackelberg game indi...