An Alternative Approach to Decisions under Uncertainty Using the Empirical Moment-Generating Function

Robert Collender and James A. Chalfant

American Journal of Agricultural Economics, 1986, vol. 68, issue 3, 727-731

Abstract: Objections to mean-variance analysis center on the requirement that the distributions be normal or the resulting inattention to higher-order moments when the solution is viewed as an approximation. A nonparametric approach to decision making under uncertainty is developed in this paper using expected utility maximization, the exponential utility function, and an empirical moment-generating function. A decision rule is obtained for land allocation under uncertainty which is not tied to a particular family of distributions and accounts for all moments of the distribution.

Date: 1986
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