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Utility function estimation: The entropy approach

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  • Dionisio, Andreia
  • Reis, A. Heitor
  • Coelho, Luis

Abstract

The maximum entropy principle can be used to assign utility values when only partial information is available about the decision maker’s preferences. In order to obtain such utility values it is necessary to establish an analogy between probability and utility through the notion of a utility density function. In this paper we explore the maximum entropy principle to estimate the utility function of a risk averse decision maker.

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File URL: http://www.sciencedirect.com/science/article/pii/S0378437108002550
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Bibliographic Info

Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

Volume (Year): 387 (2008)
Issue (Month): 15 ()
Pages: 3862-3867

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Handle: RePEc:eee:phsmap:v:387:y:2008:i:15:p:3862-3867

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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

Related research

Keywords: Maximum entropy; Utility functions; Preferences; Risk aversion;

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  1. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers 1488, Iowa State University, Department of Economics.
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