Econometrica: Jan 1964, Volume 32, Issue 1

Risk Aversion in the Small and in the Large

https://doi.org/0012-9682(196401/04)32:1/2<122:RAITSA>2.0.CO;2-W
p. 122-136

John W. Pratt

This paper concerns utility functions for money. A measure of risk aversion in the small, the risk premium or insurance premium for an arbitrary risk, and a natural concept of decreasing risk aversion are discussed and related to one another. Risks are also considered as a proportion of total assets.
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