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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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Web page: http://www.esr.ie

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References

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  1. Danyang Xie, 2000. "Power Risk Aversion Utility Functions," Annals of Economics and Finance, Society for AEF, vol. 1(2), pages 265-282, November.
  2. Conniffe, D., 2002. "Sums and Products of Indirect Utility Functions," Economics, Finance and Accounting Department Working Paper Series n1150402, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  3. Gregory M. Gelles & Douglas W. Mitchell, 1999. "Broadly Decreasing Risk Aversion," Management Science, INFORMS, vol. 45(10), pages 1432-1439, October.
  4. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
  5. 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.
  6. 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.
  7. David E. Bell & Peter C. Fishburn, 2001. "Strong One-Switch Utility," Management Science, INFORMS, vol. 47(4), pages 601-604, April.
  8. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
  9. Caballé, Jordi & Pomansky, Alexey, 1995. "Mixed Risk Aversion," Working Paper Series 444, Research Institute of Industrial Economics.
  10. David E. Bell, 1988. "One-Switch Utility Functions and a Measure of Risk," Management Science, INFORMS, vol. 34(12), pages 1416-1424, December.
  11. 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.
  12. Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-54, January.
  13. 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.
  14. 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..
  15. Nakamura, Yutaka, 1996. "Sumex utility functions," Mathematical Social Sciences, Elsevier, vol. 31(1), pages 39-47, February.
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