Constant Risk Aversion
Abstract Constant risk aversion means that adding a constant to all outcomes of two distributions, or multiplying all their outcomes by the same positive number, will not change the preference relation between them. We prove several representation theorems, where constant risk aversion is combined with other axioms to imply specific functional forms. Among other things, we obtain a form of disappointment aversion theory without using the concept of reference point in the axioms, and a form of the rank dependent model without making references to the ranking of the outcomes. This axiomatization leads to a natural generalization of the Gini index.Journal of Economic LiteratureClassification Number: D81