Conditions on Risk Attitude for a Single Attribute

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.

• 저널Management Science · 27(2) · 190–203
• 토픽Risk and Portfolio Optimization · Management Science and Operations Research
• DOI10.1287/mnsc.27.2.190
• 저자Charles M. Harvey