Abstract
This paper uses duality to elaborate Slutzky equations of risks in quasi-linear decision models extended by independent background risks. Wealth, substitution and total effects are characterized in terms of mean-variance preferences. It is shown that both Pratt and Zeckhauser’s proper risk aversion and Kimball’s standard risk aversion are sufficient for negative substitution effects.
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Eichner, T. Slutzky equations and substitution effects of risks in terms of mean-variance preferences. Theory Decis 69, 17–26 (2010). https://doi.org/10.1007/s11238-008-9115-1
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DOI: https://doi.org/10.1007/s11238-008-9115-1