Campus Units

Economics

Document Type

Article

Publication Version

Published Version

Publication Date

7-1993

Journal or Book Title

Journal of Agricultural and Resource Economics

Volume

18

Issue

1

First Page or Article ID Number

17

Last Page

24

Abstract

The risk premium and the probability premium are used to determine appropriate coefficients of absolute risk aversion under CARA utility. A defensible range of risk-aversion coefficients is defined by the coefficients that correspond to risk premiums falling between 1 and 99% of the amount at risk or to probability premiums falling between .005 and ,49 for a lottery that pays or loses a given sum. The consequences of ignoring risk premiums when selecting risk-aversion coefficients for representative decision makers are illustrated by calculation of the implied risk premium associated with the levels of absolute risk aversion assumed in six selected studies.

Comments

This is an article from Journal of Agricultural and Resource Economics, 18(1) 1993; 17-24. Posted with permission.

Copyright Owner

Western Agricultural Economics Association

Language

en

File Format

application/pdf