IDEAS home Printed from
   My bibliography  Save this article

Measuring the Utility of Losses by Means of the Tradeoff Method


  • Fennema, Hein
  • van Assen, Marcel


This paper investigates the shape of the utility function for losses. From a rational point of view it can be argued that utility should be concave. Empirically, measurements of the utility for losses show mixed results but most evidence supports convex rather than concave utilities. However, these measurements use methods that are either biased by the certainty effect or require complex parametrical estimations. This paper re-examines utility for losses, avoiding the mentioned pitfalls by using the tradeoff method. We find that utility for losses is convex. This is contrary to common assumption in the economics literature. Also, we investigate properties of the tradeoff method showing a new violation of procedure invariance. Our findings demonstrate that diminishing sensitivity is an important phenomenon for utility elicitation. Copyright 1998 by Kluwer Academic Publishers

Suggested Citation

  • Fennema, Hein & van Assen, Marcel, 1998. "Measuring the Utility of Losses by Means of the Tradeoff Method," Journal of Risk and Uncertainty, Springer, vol. 17(3), pages 277-295, December.
  • Handle: RePEc:kap:jrisku:v:17:y:1998:i:3:p:277-95

    Download full text from publisher

    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:17:y:1998:i:3:p:277-95. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Springer Nature Abstracting and Indexing). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.