When Ross meets Bell: The linex utility function

作者：Denuit Michel M^*; Eeckhoudt Louis; Schlesinger Harris

来源：Journal of Mathematical Economics, 2013, 49(2): 177-182.

DOI：10.1016/j.jmateco.2013.01.006

• Ross risk aversion
• Decreasing prudence
• One-switch utility function

At first glance, there would appear to be no relationship between Bell%26apos;s (1988) concept of one-switch utility functions and that of a stronger measure of risk aversion due to Ross (1981). We show however that specific assumptions about the behavior of the stronger measure of risk aversion also give rise to the linex utility function which belongs to the class of one-switch utility functions. In particular, this utility class is the only one that satisfies a stronger version of Kimball%26apos;s (1993) standard risk aversion over all levels of wealth. We apply our results to consider nth-degree deteriorations in background risk and their effect on risk taking behavior.

• 出版日期2013-3