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Simon Grant, Monti, Martin Osherson, Daniel

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  • A Note on Concave Utility Functions

    (Rice U)

Abstract

The classical theory of preference among monetary bets represents people as expected utility maximizers with nondecreasing concave utility functions. Critics of this account often rely on assumptions about preferences over wide ranges of total wealth. We derive a prediction of the theory that bears on bets at any fixed level of wealth, and test the prediction behaviorally. Our results are discrepant with the classical account. Competing theories are also examined in light of our data.

Suggested Citation

  • A Note on Concave Utility Functions, 2004. "Simon Grant, Monti, Martin Osherson, Daniel," Working Papers 2003-13, Rice University, Department of Economics.
  • Handle: RePEc:ecl:riceco:2003-13
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    File URL: http://www.ruf.rice.edu/~econ/papers/2003papers/13grant.pdf
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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