THE COMPARATIVE STATICS OF SHIFTS IN RISK

Abstract

In this paper, we consider the comparative statics of shifts in risk. First, we take up the stochastic order which appears in Landsberger and Meilijson [9] and also in Eeckhoudt and Gollier [2]. This order which we call, in this paper, the "monotone generalized probability ratio" (MGPR) order lies between the "monotone probability ratio"(MPR) order and the "second-degree stochastic dominance" (SSD) order. We examine the comparative statics of the MGPR shift in risk in the economic model used by Eeckhoudt, and Gollier [2] Second we consider the "third degree stochastic dominance" (TSD) shift and t,he TSD transformation and discuss their comparative statics in some economic models.