Theory and Decision 59 (1):43-50 (2005)

By means of minimal assumptions on the individual preferences, I show that the Willingness To Pay (WTP) for both a FSD and SSD reduction of risk is the sum of a mean effect, a pure risk effect and a wealth effect. As a result, the WTP of a risk-averse decision maker may be lower than the WTP of a risk-neutral one, for a large class of individual preferences’ representation and a large class of risks
Keywords Risk premium  willingness to pay  first and second stochastic dominance shifts in risk
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DOI 10.1007/s11238-005-7303-9
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