ESTIMATING EXPONENTIAL UTILITY FUNCTIONS

The exponential utility function for money has long attracted attention from theorists because it exhibits nonincreasing absolute risk aversion. Also, under certain conditions, it generates an expected utility function that is maximizable in a quadratic program. However, this functional form presents estimation problems. Logarithmic transformation of an exponential utility function does not conform to the Von Neumann-Morgenstern axioms. Hence, it cannot be used as a basis for best fit in statistical analysis. A criterion is described that can be used to select a best-fit exponential utility function, and its application in grower utility analysis is demonstrated.


Keywords:
Issue Date:
1978-01
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/148095
Published in:
Agricultural Economics Research, Volume 30, Number 1
Page range:
37-43
Total Pages:
7




 Record created 2017-04-01, last modified 2017-08-27

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)