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 there can be significant difference between risk preferences of individual investors and aggregate preferences toward risk in the economy. To demonstrate this, we investigate aggregate properties of an economy where all investors have convex utility functions corresponding to risk seeking behavior. In the case of risk seeking individual agents with identical initial endowments, ass...

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...

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 ...