On Social Preferences and the Intensity of Risk Aversion

Arbeitspapier

We study the relative risk aversion of an individual with particular social preferences: his wellbeing is influenced by his relative wealth, and by how concerned he is about having low relative wealth. Holding constant the individual's absolute wealth, we obtain two results. First, if the individual's level of concern about low relative wealth does not change, the individual becomes more risk averse when he rises in the wealth hierarchy. Second, if the individual's level of concern about low relative wealth intensifies when he rises in the wealth hierarchy and if, in precise sense, this intensification is strong enough, then the individual becomes less risk averse: the individual's desire to advance further in the wealth hierarchy is more important to him than possibly missing out on a better rank.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 12423

Classification and Topics

• Classification: Wirtschaft ; Personal Income, Wealth, and Their Distributions ; Criteria for Decision-Making under Risk and Uncertainty ; Portfolio Choice; Investment Decisions
• Subject: relative risk aversion ; wealth rank ; concern about low relative wealth

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Stark, Oded
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/202769
• Last update: 10.03.2025, 11:43 AM CET