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Generalised Means of Simple Utility Functions with Risk Aversion

  • Denis Conniffe

    ()

    (Economics, National University of Ireland, Maynooth)

The paper examines the properties of a generalised mean of simple utilities each displaying risk aversion, that is, with first derivative positive and second derivative negative. It proves the mean is itself a valid utility function with the appropriate signs for derivatives and investigates risk aversion properties. It shows that simple component utilities, each of which may have quite restricted risk aversion properties, can be parsimoniously combined through the generalised mean formula to give a much more versatile utility function.

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File URL: http://repec.maynoothuniversity.ie/mayecw-files/N1790907.pdf
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Paper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n1790907.pdf.

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Length: 12 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:may:mayecw:n1790907.pdf
Contact details of provider: Postal: Maynooth, Co. Kildare
Phone: 353-1-7083728
Fax: 353-1-7083934
Web page: http://www.maynoothuniversity.ie/economics-finance-and-accounting

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  1. Gerry Boyle & Denis Conniffe, 2006. "Compatibility of Expected Utility and µ/s Approaches to Risk for a Class of Non Location-Scale Distributions," Economics, Finance and Accounting Department Working Paper Series n1670406, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  2. David E. Bell & Peter C. Fishburn, 2001. "Strong One-Switch Utility," Management Science, INFORMS, vol. 47(4), pages 601-604, April.
  3. David E. Bell, 1988. "One-Switch Utility Functions and a Measure of Risk," Management Science, INFORMS, vol. 34(12), pages 1416-1424, December.
  4. Conniffe, D., 2002. "Sums and Products of Indirect Utility Functions," Economics, Finance and Accounting Department Working Paper Series n1150402, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  5. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
  6. Nakamura, Yutaka, 1996. "Sumex utility functions," Mathematical Social Sciences, Elsevier, vol. 31(1), pages 39-47, February.
  7. Danyang Xie, 1999. "Power Risk Aversion Utility Functions," CEMA Working Papers 22, China Economics and Management Academy, Central University of Finance and Economics, revised Oct 2000.
  8. Gregory M. Gelles & Douglas W. Mitchell, 1999. "Broadly Decreasing Risk Aversion," Management Science, INFORMS, vol. 45(10), pages 1432-1439, October.
  9. Meyer, Donald J. & Meyer, Jack, 2005. "Risk preferences in multi-period consumption models, the equity premium puzzle, and habit formation utility," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1497-1515, November.
  10. Prof. Denis Conniffe, 2002. "Sums and Products of Indirect Utility Functions," NIRSA Working Paper Series 6, National Institute for Regional and Spatial Analysis (NIRSA), NUI Maynooth, Ireland..
  11. Miles S. Kimball, 1991. "Standard Risk Aversion," NBER Technical Working Papers 0099, National Bureau of Economic Research, Inc.
  12. Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-54, January.
  13. Caballé, Jordi & Pomansky, Alexey, 1995. "Mixed Risk Aversion," Working Paper Series 444, Research Institute of Industrial Economics.
  14. Maurice J. Roche, 2006. "The equity premium puzzle and decreasing relative risk aversion," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(3), pages 179-182, May.
  15. Conniffe Denis, 2007. "A Note on Generating Globally Regular Indirect Utility Functions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-13, January.
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