Imprudent Risk Lovers are Inconsistent

7 Pages Posted: 12 Jan 2014

See all articles by Olivier Le Courtois

Olivier Le Courtois

EM Lyon (Ecole de Management de Lyon) - Department of Economics, Finance, Control

Date Written: January 12, 2014

Abstract

Research characterizes most risk averters as prudent and temperate but devotes little attention to the study of risk lovers. The risk lovers who prefer to combine good with good are prudent and intemperate. This paper shows how the assumption of “combining good with good” can be relaxed, and how similar results can come from the consistency hypothesis for decision makers. Namely, the risk lovers who are consistent are prudent and intemperate with positive derivatives of their utility function for all orders. However, empirically risk lovers do exist who are both imprudent and intemperate. These risk lovers, being imprudent, are inconsistent.

Suggested Citation

Le Courtois, Olivier Arnaud, Imprudent Risk Lovers are Inconsistent (January 12, 2014). Available at SSRN: https://ssrn.com/abstract=2377884 or http://dx.doi.org/10.2139/ssrn.2377884

Olivier Arnaud Le Courtois (Contact Author)

EM Lyon (Ecole de Management de Lyon) - Department of Economics, Finance, Control ( email )

23, av. Guy de Collongue
69134 Ecully Cedex
France

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