Expected utility, μ-σ preferences, and linear distribution classes: A further result

Sinn, Hans-Werner (1990): Expected utility, μ-σ preferences, and linear distribution classes: A further result. In: Journal of Risk and Uncertainty, Vol. 3, No. 3: pp. 277-281

Abstract

This article is an extension of Meyer and Sinn’s results on the representation of arbitrary von Neumann-Morgenstern functions in μ-σ space when the probability distributions to be compared belong to a linear distribution class. It shows that, when absolute risk aversion decreases, stays constant, or increases not too fast, an increase in σ, given μ, increases the indifference curve slope: increased riskiness increases the required marginal compensation for risk when risk is measured by the standard deviation of wealth or income.

• Item Type: Journal article
• Faculties: Economics; Economics > Chairs > Chair for Public Economics
• Subjects: 300 Social sciences > 330 Economics
• Language: English