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Representing Risk Preferences in Expected Utility Based Decision Models

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Author Info
Meyer, Jack

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Abstract

The application and estimation of expected utility based decision models would benefit from having additional simple and flexible functional forms to represent risk preferences. The literature so far has provided these functional forms for the utility function itself. This work shows that functional forms for the marginal utility function are as useful, are easier to provide, and can represent a larger set of risk preferences. Several functional forms for marginal utility are suggested, and how they can be used is discussed. These marginal utility functions represent risk preferences that cannot be represented by any functional form for the utility function.

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Publisher Info
Paper provided by SCC-76: Economics and Management of Risk in Agriculture and Natural Resources in its series SCC-76 Meeting, March 15-17, 2007, Gulf Shores, Alabama with number 9380.

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Date of creation: 2007
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Handle: RePEc:ags:sccsgs:9380

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Web page: http://www.auburn.edu/academic/agriculture/agrisk
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Keywords: Risk and Uncertainty;

References listed on IDEAS
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. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March. [Downloadable!] (restricted)
  2. Denis Conniffe, 2007. "The Generalised Extreme Value Distribution as Utility Function," Economics, Finance and Accounting Department Working Paper Series n1780907, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
  3. 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)
  4. Denis Conniffe, 2007. "The Generalised Extreme Value Distribution as Utility Function," The Economic and Social Review, Economic and Social Studies, vol. 38(3), pages 275–288. [Downloadable!]
  5. Narayana R. Kocherlakota, 1996. "The Equity Premium: It's Still a Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 42-71, March. [Downloadable!] (restricted)
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  6. 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)
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Cited by:
(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. Denis Conniffe, 2007. "The Generalised Extreme Value Distribution as Utility Function," Economics, Finance and Accounting Department Working Paper Series n1780907, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
  2. Denis Conniffe, 2007. "The Generalised Extreme Value Distribution as Utility Function," The Economic and Social Review, Economic and Social Studies, vol. 38(3), pages 275–288. [Downloadable!]
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