Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Income risk aversion with quantity constraints.
Abstract: In this paper, I consider a consumer with a concave
utility function over n commodities and trace out the consequences of
quantity constraints on product markets for the consumerís aversion towards
income risk. I show that the effect can be decomposed in a cardinal and
ordinal term, that both terms may add up to a non-linear effct on the
coefficient of relative risk aversion, and that a severely rationed
consumer may even become less risk averse then when unconstrained.
Keywords: Household demand; income risk aversion; quantity constraints.; (follow links to similar papers)
JEL-Codes: D11; D81; (follow links to similar papers)
13 pages, February 4, 2010
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