Expected utility, μ-σ preferences, and linear distribution classes: A further result

Hans-Werner Sinn

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: This article is an extension of Meyer and Sinn’s results on the representation of arbitrary von Neumann-Morgenstern functions in μ-σ space when the probability distributions to be compared belong to a linear distribution class. It shows that, when absolute risk aversion decreases, stays constant, or increases not too fast, an increase in σ, given μ, increases the indifference curve slope: increased riskiness increases the required marginal compensation for risk when risk is measured by the standard deviation of wealth or income.

Date: 1990
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Citations: View citations in EconPapers (19)

Published in Journal of Risk and Uncertainty 3 3(1990): pp. 277-281

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