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The Generalised Extreme Value Distribution as Utility Function

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Author Info
Denis Conniffe (National University of Ireland, Maynooth, Co Kildare)
Abstract

The idea that probability distribution functions could provide appropriate mathematical forms for utility functions representing risk aversion is of respectable antiquity. But the relatively few examples that have appeared in the economics literature have displayed quite restrictive risk aversion properties. This paper examines the potential of the generalised extreme value (GEV) distribution as utility function, showing it possesses considerable flexibility as regards risk aversion properties, even in its single parameter form. The paper concludes that the GEV utility function is worth considering for applications in cases where parametric parsimony matters.

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File URL: http://www.esr.ie/Vol38_3/01%20Vol%2038%20Conniffe.pdf
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File Function: First version, 2007
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Publisher Info
Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 38 (2007)
Issue (Month): 3 ()
Pages: 275–288
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:eso:journl:v:38:y:2007:i:3:p:275-288

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Caballe, J. & Pomansky, A., 1995. "Mixed Risk Aversion," Research Institute of Industrial Economics Working Papers 444, Research Institute of Industrial Economics (IFN).
  2. Meyer, Jack, 2007. "Representing Risk Preferences in Expected Utility Based Decision Models," SCC-76 Meeting, March 15-17, 2007, Gulf Shores, Alabama 9380, SCC-76: Economics and Management of Risk in Agriculture and Natural Resources. [Downloadable!]
  3. Manski, Charles F, 2001. " Daniel McFadden and the Econometric Analysis of Discrete Choice," Scandinavian Journal of Economics, Blackwell Publishing, vol. 103(2), pages 217-29, June. [Downloadable!] (restricted)
  4. Milton Friedman & L. J. Savage, 1948. "The Utility Analysis of Choices Involving Risk," Journal of Political Economy, University of Chicago Press, vol. 56, pages 279. [Downloadable!] (restricted)
  5. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May. [Downloadable!] (restricted)
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  6. Caballe, Jordi & Pomansky, Alexey, 1996. "Mixed Risk Aversion," Journal of Economic Theory, Elsevier, vol. 71(2), pages 485-513, November. [Downloadable!] (restricted)
  7. Meyer, Donald J. & Meyer, Jack, 2005. "Risk preferences in multi-period consumption models, the equity premium puzzle, and habit formation utility," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1497-1515, November. [Downloadable!] (restricted)
  8. LiCalzi, Marco & Sorato, Annamaria, 2006. "The Pearson system of utility functions," European Journal of Operational Research, Elsevier, vol. 172(2), pages 560-573, July. [Downloadable!] (restricted)
    Other versions:
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Meyer, Jack, 2007. "Representing Risk Preferences in Expected Utility Based Decision Models," SCC-76 Meeting, March 15-17, 2007, Gulf Shores, Alabama 9380, SCC-76: Economics and Management of Risk in Agriculture and Natural Resources. [Downloadable!]
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