TY - JOUR

T1 - A tale of two tails

T2 - An alternative characterization of comparative risk

AU - Landsberger, Michael

AU - Meilijson, Isaac

PY - 1990/3

Y1 - 1990/3

N2 - A characterization of comparative risk, parallel to but more restrictive than the Rothschild-Stiglitz (1970) characterization, is developed. As in Rothschild and Stiglitz, we develop a four-way characterization that consists of generating processes (a noise condition and generation by a sequence of special mean-preserving spreads), integral conditions, and preferences. The building blocks of this new order, Mean-preserving increases in risk about ν, where ν is any constant, are mean-preserving spreads whose centers have a nonempty intersection. If this intersection contains the mean of the distribution, the induced order, or mean-preserving increase in risk about the mean, conveys a particularly meaningful notion of an increase in risk as a buildup of the tails of the distribution.

AB - A characterization of comparative risk, parallel to but more restrictive than the Rothschild-Stiglitz (1970) characterization, is developed. As in Rothschild and Stiglitz, we develop a four-way characterization that consists of generating processes (a noise condition and generation by a sequence of special mean-preserving spreads), integral conditions, and preferences. The building blocks of this new order, Mean-preserving increases in risk about ν, where ν is any constant, are mean-preserving spreads whose centers have a nonempty intersection. If this intersection contains the mean of the distribution, the induced order, or mean-preserving increase in risk about the mean, conveys a particularly meaningful notion of an increase in risk as a buildup of the tails of the distribution.

KW - mean-preserving spreads

KW - risk

KW - star-shape

KW - uncertainty

UR - http://www.scopus.com/inward/record.url?scp=0001773671&partnerID=8YFLogxK

U2 - 10.1007/BF00213261

DO - 10.1007/BF00213261

M3 - מאמר

AN - SCOPUS:0001773671

VL - 3

SP - 65

EP - 82

JO - Journal of Risk and Uncertainty

JF - Journal of Risk and Uncertainty

SN - 0895-5646

IS - 1

ER -