On social preferences and the intensity of risk aversion

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Dateien:
Aufrufstatistik

URI: http://hdl.handle.net/10900/81788
http://nbn-resolving.de/urn:nbn:de:bsz:21-dspace-817883
http://dx.doi.org/10.15496/publikation-23182
Dokumentart: Aufsatz
Date: 2018-05-02
Source: University of Tübingen Working Papers in Economics and Finance ; 105
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Economics
Other Keywords:
Relative risk aversion
Wealth rank
Concern about low relative wealth
License: Publishing license excluding print on demand
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Abstract:

We study the relative risk aversion of an individual with particular social preferences: his wellbeing is influenced by his relative wealth, and by how concerned he is about having low relative wealth. Holding constant the individual’s absolute wealth, we obtain two results. First, if the individual’s level of concern about low relative wealth does not change, the individual becomes more risk averse when he rises in the wealth hierarchy. Second, if the individual’s level of concern about low relative wealth intensifies when he rises in the wealth hierarchy and if, in precise sense, this intensification is strong enough, then the individual becomes less risk averse: the individual’s desire to advance further in the wealth hierarchy is more important to him than possibly missing out on a better rank.

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