Linear Fractional Relative Risk Aversion

Kristian Behrens and Yasusada Murata

No 20769, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We characterize the family of utility functions satisfying linear fractional relative risk aversion (LFRRA) in terms of the Gauss hypergeometric functions. We apply this family, which nests various utility functions used in different strands of literature, to monopolistic competition and obtain the profit-maximizing price by generalizing the Lambert W function. We let firm-level data decide whether the RRA in each sector or in the aggregate economy is increasing, decreasing, or constant, which in turn determines whether markups are decreasing, increasing, or constant with respect to marginal costs.

Keywords: Gauss; hypergeometric; functions (search for similar items in EconPapers)
JEL-codes: D11 D21 D22 D43 (search for similar items in EconPapers)
Date: 2025-10
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP20769 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:20769

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP20769

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().