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1、SocChoiceWelfare(2007)28:89110DOI10.1007/s00355-006-0151-xORIGINALPAPERJordiCaballe·JoanEstebanStochasticdominanceandabsoluteriskaversionReceived:27March2004/Accepted:25January2006/Publishedonline:5May2006©Springer-Verlag2006AbstractInthispaper,wepropos
2、etheinfimumoftheArrowPrattindexofabso-luteriskaversionasameasureofglobalriskaversionofautilityfunction.Weshowthat,foranygivenarbitrarypairofdistributions,thereexistsathresholdlevelofglobalriskaversionsuchthatallincreasingconcaveutilityfunctionswithatleas
3、tasmuchglobalriskaversionwouldrankthetwodistributionsinthesameway.Furthermore,thisthresholdlevelissharpinthesensethat,foranylowerlevelofglobalriskaversion,wecanfindtwoutilityfunctionsinthisclassyieldingoppositepreferencerelationsforthetwodistributions.1I
4、ntroductionHadarandRussell(1969)andRothschildandStiglitz(1970)proposedthefollow-ingnotionofriskiness:onedistributionisriskierthananotherwhentheformerThispaperhasbenefitedfrominsightfulcommentsmadebyJamesMirrless,twoanonymousreferees,andbyseminarparticipa
5、ntsatIAEandSimposiodeAnálisisEconómicoinSalamanca.Theyshouldnotbearanyresponsibilityfortheremainingerrors.FinancialsupportfromtheSpan-ishMinistryofEducationandScienceandFEDERthroughgrantsSEC2003-306andSEC2003-1961,fromtheGeneralitatofCataloniathroughthe
6、BarcelonaEconomicsprogram(CREA)andgrants2005SGR00447and2005SGR00626isgratefullyacknowledged.ThispaperispartofthePolarizationandConflictproject,contract3CIT2-CT-2004-506084fundedbytheEuropeanCommission.J.Caballe(B)DepartamentdEconomiaidHistòriaEconòmica,U
7、nitatdeFonamentsdelAnàlisiEconòmicaandCODE,UniversitatAutònomadeBarcelona,EdificiB.08193Bellaterra,Barcelona,SpainE-mail:Jordi.Caballe@uab.esJ.EstebanInstitutdAnàlisiEconòmica,ConsejoSuperiordeInvestigacionesCientíficas,08193Bellaterra,Barcelona,Spain90J.
8、Caballe,J.Estebandominatesthelatteraccordingtothesecond-orderstochasticdominance(SOSD)criterion,i.e.whenitisunanimouslypreferredbyallexpectedutilitymaximizerswhoprefermoretolessandwhoareriskaverters.Unanimityrequiresthusthatallde
