INCREASES IN RISK AND LINEAR PAYOFFS

This paper is concerned with the effect of increases in risk on optima l decision variables. for the class of linear payoffs. We show that fo r this class of payoffs one can extend the class of admissible increas es in risk and obtain the desirable comparative statics properties. We propose the definition of a ''relatively weak increase in risk'' and apply it to the case of the competitive firm with constant marginal co sts, the standard portfolio model and the coinsurance problem.