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Generalised Means of Simple Utility Functions with Risk Aversion

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  • Conniffe, Denis

    (Dept. of Economics, National University of Ireland, Maynooth, Co. Kildare)

Abstract

The paper examines the properties of a generalised mean of simple utilities each displaying risk aversion, that is, with first derivative positive and second derivative negative. It shows the mean is itself a valid utility function and argues that simple component utilities, each of which may have quite restricted risk aversion properties, can be parsimoniously combined through the generalised mean formula to give a much more versatile utility function.

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File URL: http://www.esr.ie/Vol39_1/01%20Conniffe.pdf
File Function: First version, 2008
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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 39 (2008)
Issue (Month): 1 ()
Pages: 1-12

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Handle: RePEc:eso:journl:v:39:y:2008:i:1:p:1-12

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  1. M. J. Roche, 2005. "The equity premium puzzle and decreasing relative risk aversion," Economics, Finance and Accounting Department Working Paper Series n1510205, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  2. Danyang Xie, 2000. "Power Risk Aversion Utility Functions," Annals of Economics and Finance, Society for AEF, vol. 1(2), pages 265-282, November.
  3. Caballe, Jordi & Pomansky, Alexey, 1996. "Mixed Risk Aversion," Journal of Economic Theory, Elsevier, vol. 71(2), pages 485-513, November.
  4. Denis Conniffe, 2002. "Sums and Products of Indirect Utility Functions," The Economic and Social Review, Economic and Social Studies, vol. 33(3), pages 285-295.
  5. David E. Bell & Peter C. Fishburn, 2001. "Strong One-Switch Utility," Management Science, INFORMS, vol. 47(4), pages 601-604, April.
  6. David E. Bell, 1988. "One-Switch Utility Functions and a Measure of Risk," Management Science, INFORMS, vol. 34(12), pages 1416-1424, December.
  7. Prof. Denis Conniffe, 2002. "Sums and Products of Indirect Utility Functions," NIRSA Working Paper Series 6, National Institute for Regional and Spatial Analysis (NIRSA), NUI Maynooth, Ireland..
  8. Gregory M. Gelles & Douglas W. Mitchell, 1999. "Broadly Decreasing Risk Aversion," Management Science, INFORMS, vol. 45(10), pages 1432-1439, October.
  9. Nakamura, Yutaka, 1996. "Sumex utility functions," Mathematical Social Sciences, Elsevier, vol. 31(1), pages 39-47, February.
  10. Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-54, January.
  11. 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.
  12. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
  13. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
  14. Gerry Boyle & Denis Conniffe, 2006. "Compatibility of Expected Utility and µ/s Approaches to Risk for a Class of Non Location-Scale Distributions," Economics, Finance and Accounting Department Working Paper Series n1670406, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  15. Conniffe Denis, 2007. "A Note on Generating Globally Regular Indirect Utility Functions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-13, January.
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