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Explaining the characteristics of the power (CRRA) utility family

  • Peter P. Wakker

    (Econometric Institute, Erasmus University Rotterdam, Rotterdam, The Netherlands)

The power family, also known as the family of constant relative risk aversion (CRRA), is the most widely used parametric family for fitting utility functions to data. Its characteristics have, however, been little understood, and have led to numerous misunderstandings. This paper explains these characteristics in a manner accessible to a wide audience. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.1331
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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 17 (2008)
Issue (Month): 12 ()
Pages: 1329-1344

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Handle: RePEc:wly:hlthec:v:17:y:2008:i:12:p:1329-1344
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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