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Local Utility Functions and Local Probability Transformations

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  • Quiggin, John
  • Chambers, Robert G

Abstract

This note shows that, under appropriate conditions, preferences may be locally approximated by the linear utility or risk-neutral preference functional associated with a local probability transformation. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • Quiggin, John & Chambers, Robert G, 2003. "Local Utility Functions and Local Probability Transformations," Journal of Risk and Uncertainty, Springer, vol. 27(2), pages 111-120, October.
  • Handle: RePEc:kap:jrisku:v:27:y:2003:i:2:p:111-20
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    References listed on IDEAS

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    1. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    2. Péter Esö & Lucy White, 2004. "Precautionary Bidding in Auctions," Econometrica, Econometric Society, vol. 72(1), pages 77-92, January.
    3. Eeckhoudt, Louis R & Hammitt, James K, 2001. "Background Risks and the Value of a Statistical Life," Journal of Risk and Uncertainty, Springer, vol. 23(3), pages 261-279, November.
    4. Rosen, Sherwin, 1988. "The Value of Changes in Life Expectancy," Journal of Risk and Uncertainty, Springer, vol. 1(3), pages 285-304, September.
    5. Garber, Alan M. & Phelps, Charles E., 1997. "Economic foundations of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 16(1), pages 1-31, February.
    6. Aumann, Robert J & Kurz, Mordecai, 1977. "Power and Taxes," Econometrica, Econometric Society, vol. 45(5), pages 1137-1161, July.
    7. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, March.
    8. Roth, Alvin E & Rothblum, Uriel G, 1982. "Risk Aversion and Nash's Solution for Bargaining Games with Risky Outcomes," Econometrica, Econometric Society, vol. 50(3), pages 639-647, May.
    9. Jones-Lee, M W, 1980. "Maximum Acceptable Physical Risk and a New Measure of Financial Risk-Aversion," Economic Journal, Royal Economic Society, vol. 90(359), pages 550-568, September.
    10. Konrad, Kai A & Schlesinger, Harris, 1997. "Risk Aversion in Rent-Seeking and Rent-Augmenting Games," Economic Journal, Royal Economic Society, vol. 107(445), pages 1671-1683, November.
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    Cited by:

    1. Chambers, Robert G. & Melkonyan, Tigran, 2017. "Ambiguity, reasoned determination, and climate-change policy," Journal of Environmental Economics and Management, Elsevier, vol. 81(C), pages 74-92.

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