Representing risk preferences in expected utility based decision models

Jack Meyer ()

Annals of Operations Research, 2010, vol. 176, issue 1, 179-190

Abstract: Users of expected utility based decision models frequently find it useful or necessary to specify a functional form that represents the risk preferences of a decision maker. Having additional functional forms from which to choose would be helpful. The literature so far has provided several such functional forms for the utility function itself. The discussion presented here indicates that providing a functional form for the marginal utility function is an alternate and equally useful way to represent risk preferences. Furthermore, functional forms for marginal utility are easier to provide, and there exist functional forms for marginal utility that represent simple risk preferences for which there is no associated functional form for the utility function. Several functional forms for marginal utility are suggested, and the class of isoelastic risk preferences is identified and discussed. Copyright Springer Science+Business Media, LLC 2010

Keywords: Risk preferences; Marginal utility; Expected utility (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (15)

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Working Paper: Representing Risk Preferences in Expected Utility Based Decision Models (2007)
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DOI: 10.1007/s10479-008-0381-7

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