Consider a decision maker who can engage in effort to increase the probability of facing a better risky situation. Intuition suggests that effort should increase when there is a greater difference between the best risky situation and the worse one. We show that this intuition is not necessarily valid and we consider the cases of risk averters and risk lovers.
Changing risks and optimal effort / Crainich, David; Eeckhoudt, Louis; Menegatti, Mario. - In: JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION. - ISSN 0167-2681. - 125(2016), pp. 97-106. [10.1016/j.jebo.2016.01.009]
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