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The Probability Premium Approach to Comparative Risk Aversion
(Private Enterprise Research Center, Texas A&M University, 2015-04-23)
In the framework of expected utility, nth-degree risk aversion/loving is unequivocally characterized by the sign of the nth-order derivative of the utility function, but there exist different notions of one decision maker ...
Optimality of Winner-Take-All Contests: The Role of Attitudes Toward Risk
(Private Enterprise Research Center, Texas A&M University, 2019-12-16)
It has been established in the literature that, under the assumption of risk-neutral contestants, it is usually optimal for an effort maximizing contest organizer with a fixed prize budget to award everything to a single ...
Alternative Approaches to Comparative nth-Degree Risk Aversion
(Private Enterprise Research Center, Texas A&M University, 2018-07-30)
Economists have used the risk premium and the probability premium that are revealed through individual choices to compare how risk averse two individuals are. These behavioral, or choice-based, measures of risk aversion ...
Inter-Jurisdiction Migration and the Fiscal Policies of Local Governments
(Private Enterprise Research Center, Texas A&M University, 2019-02-04)
In this paper, authors Darong Dai, Dennis W. Jansen and Liqun Liu analyze the effects of migration on the fiscal policies of local governments. Because of the possibility of migrating to another jurisdiction later in life, ...
Staying the Course or Rolling the Dice: Time Horizon’s Effect on the Propensity to Take Risk
(Private Enterprise Research Center, Texas A&M University, 2019-02-06)
Is the old adage that states that the young take more risk than the old correct? In PERC Working Paper 1902, authors Liqun Liu, Andrew J. Rettenmaier and Thomas R. Saving investigate this conventional wisdom in the context ...
Portfolio Choice in the Model of Expected Utility with a Safety-First Component
(Private Enterprise Research Center, Texas A&M University, 2020-10-14)
Whereas the majority of economists interpret risk as dispersion or variation in an outcome variable, many everyday decision makers tend to associate risk with the outcome failing to meet a certain “safety� level. In ...
Restricted Increases in Risk Aversion and Their Application
(Private Enterprise Research Center, Texas A&M University, 2015-02-23)
This paper proposes two restricted forms of an increase in risk aversion. Using examples from portfolio choice, self-protection and insurance demand, it is shown that these stronger notions of increased risk aversion ...
Tradeoffs for Downside Risk-Averse Decision-Makers and the Self-Protection Decision
(Private Enterprise Research Center, Texas A&M University, 2015-03-26)
Besides risk aversion, decision makers are often assumed to be downside risk averse. In order to investigate tradeoffs that downside risk averse decision makers face, this paper proposes five stochastic orders, each ...
Coronavirus Economics: The Impact of Shutting Down Meatpacking Plants
(Private Enterprise Research Center, Texas A&M University, 2020-06-25)
Motivated by the observed beef and livestock market impacts of coronavirus-caused meatpacking plant shutdowns, this paper constructs a theoretical model to study the effects of closures among downstream producers on both ...
Risk and Risk Aversion Effects in Contests with Contingent Payments
(Private Enterprise Research Center, Texas A&M University, 2017-03-01)
Contests by their very nature involve risk, winning and losing are both possible, and the gain from winning can itself be uncertain. The participants in a contest use resources to increase their chance of winning. The main ...