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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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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
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