Risk Aversion and Expected-Utility Theory: A Calibration Theorem

Article, Preprint OPEN
Rabin, Matthew;
(2000)
  • Publisher: eScholarship, University of California
  • Subject: expected utility | risk aversion | Diminishing Marginal utility | Diminishing Marginal utility, expected utility, risk aversion
    • jel: jel:D11 | jel:B49 | jel:D81

Within the expected-utility framework, the only explanation for risk aversion is that the utility function for wealth is concave: A person has lower marginal utility for additional wealth when she is wealthy than when she is poor. This paper provides a theorem showing t... View more
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