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Handbook of Insurance pp 117–130Cite as

The Effects of Changes in Risk on Risk Taking: A Survey

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Abstract

We examine an important class of decision problems under uncertainty that entails the standard portfolio problem and the demand for coinsurance. The agent faces a controllable risk—his demand for a risky asset for example—and a background risk. We determine how a change in the distribution in one of these two risks affects the optimal exposure to the controllable risk. Restrictions on first order and second order stochastic dominance orders are in general necessary to yield an unambiguous comparative statics property. We also review another line of research in which restrictions are made on preferences rather than on stochastic dominance orders.

We thank two referees for their useful comments on a preliminary version of the chapter.

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Author information

Authors and Affiliations

  1. Catholic Faculties of Mons, USA

    Louis Eeckhoudt

  2. University of Toulouse, USA

    Christian Gollier

Authors
  1. Louis Eeckhoudt
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  2. Christian Gollier
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Editor information

Editors and Affiliations

  1. HEC-Montréal, Canada

    Georges Dionne (Risk Management Chair) (Risk Management Chair)

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© 2000 Springer Science+Business Media New York

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Eeckhoudt, L., Gollier, C. (2000). The Effects of Changes in Risk on Risk Taking: A Survey. In: Dionne, G. (eds) Handbook of Insurance. Huebner International Series on Risk, Insurance, and Economic Security, vol 22. Springer, Dordrecht. https://doi.org/10.1007/978-94-010-0642-2_4

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  • DOI: https://doi.org/10.1007/978-94-010-0642-2_4

  • Publisher Name: Springer, Dordrecht

  • Print ISBN: 978-0-7923-7911-9

  • Online ISBN: 978-94-010-0642-2

  • eBook Packages: Springer Book Archive

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