Precautionary Effort Investment under Cross Risk Aversion
1, Jie MEI 2, Wen CHENG 3, Sijie ZOU 4
1. Department of Teacher Education, Maanshan Teacher's College, Ma'anshan 243041, China;
2. Class 6, Grade 1, No.1 Middle School Affiliated to Central China Normal University, Wuhan 430223, China;
3. Department of Risk Management, China Huarong Asset Management Co., Ltd, Beijing 100033, China;
4. Department of Finance, Shandong Branch, China Three Gorges New Energy Co., Ltd, Jinan 277000, China
This paper deals with the effort problem under multiple risks in bivariate utility setting. We identify preference conditions to insure positive or negative effect of a background variable uncertainty on effort in the presence of other risks. We allow for the simultaneous presence of wealth and background variable uncertainties. We investigate the joint effect of two-source uncertainties on effort when two risks are either small or positive quadrant dependent. Our work extends the previous model of effort to bivariate utility framework and presents new insights into the issue of optimal effort under uncertainty.
Key words： precautionary effort
decision-making under uncertainty
Supported by the College Excellent Young Talents Program of Anhui (gxyq2017243) and the College Natural Science Foundation of Anhui Provincial Education Department (KJ2017A851)
Corresponding Authors: Wen CHENG,E-mail:firstname.lastname@example.org
About author: Yuqing TAO,E-mail:email@example.com;Jie MEI,E-mail:firstname.lastname@example.org;Sijie ZOU,E-mail:email@example.com
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