Putting Risk in its Proper Place
CESifo, Munich, 2005
CESifo Working Paper No. 1462
![](https://cesifo.org/DocImg/cesifo1_wp1462.jpg?c=1689237178)
This paper examines preferences towards particular classes of lottery pairs. We show how concepts such as prudence and temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expected-utility framework with differentiable utility, the direction of preference for a particular class of lottery pairs is equivalent to signing the nth derivative of the utility function. What makes our characterization appealing is its simplicity, which seems particularly amenable to experimentation.