Premium
Expo‐Power Utility: A ‘Flexible’ Form for Absolute and Relative Risk Aversion
Author(s) -
Saha Atanu
Publication year - 1993
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1243978
Subject(s) - preference , risk aversion (psychology) , constant (computer programming) , function (biology) , power (physics) , economics , econometrics , absolute (philosophy) , absolute risk reduction , expected utility hypothesis , mathematical economics , computer science , mathematics , microeconomics , statistics , thermodynamics , physics , philosophy , epistemology , evolutionary biology , biology , programming language , confidence interval
A new utility function, which I call expo‐power, is proposed that exhibits decreasing, constant, or increasing absolute risk aversion and decreasing or increasing relative risk aversion, depending on parameter values. Numerical analysis suggests that the expo‐power function performs well in incorporating these risk preference structures, and that arbitrary risk preference specifications may lead to biased risk response estimates.
Accelerating Research
Robert Robinson Avenue,
Oxford Science Park, Oxford
OX4 4GP, United Kingdom
Address
John Eccles HouseRobert Robinson Avenue,
Oxford Science Park, Oxford
OX4 4GP, United Kingdom