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Conditions on Risk Attitude for a Single Attribute

Author

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  • Charles M. Harvey

    (Dickinson College)

Abstract

For a decision problem having consequences described by a single attribute, the task of determining a utility function can be facilitated by verifying that the decision maker's risk attitude satisfies a condition such as constant risk aversion. We investigate a general class of conditions on risk attitude, and show that a utility function for such a condition may exist only when the condition is of a special type. Next, we discuss and interpret conditions of this special type. Then, we define two conditions which imply that the decision maker's risk attitude satisfies a condition of this type and is represented by a generalized logarithmic utility function or a linear fractional utility function.

Suggested Citation

  • Charles M. Harvey, 1981. "Conditions on Risk Attitude for a Single Attribute," Management Science, INFORMS, vol. 27(2), pages 190-203, February.
    • Handle: RePEc:inm:ormnsc:v:27:y:1981:i:2:p:190-203
    DOI: 10.1287/mnsc.27.2.190
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    Cited by:

    1. Peter H. Farquhar & Yutaka Nakamura, 1988. "Utility assessment procedures for polynomial‐exponential functions," Naval Research Logistics (NRL), John Wiley & Sons, vol. 35(6), pages 597-613, December.
    2. Hamal, K.B. & Anderson, Jock R., 1982. "A Note On Decreasing Absolute Risk Aversion Among Farmers In Nepal," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 26(3), pages 1-6, December.

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    Keywords

    utility/preference: theory;

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