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A Note on Concave Utility Functions

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Monti, Martin M; Grant, Simon; Osherson, Daniel N

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The classical theory of preference among monetary bets represents people as expected utility maximizers with concave utility functions. Critics of this account often rely on assumptions about preferences over wide ranges of total wealth. We derive a prediction of the theory that bears on bets at any fixed level of wealth, and test the prediction behaviorally. Our results are discrepant with the classical account. Competing theories are also examined in light of our data.

dc.contributor.authorMonti, Martin M
dc.contributor.authorGrant, Simon
dc.contributor.authorOsherson, Daniel N
dc.date.accessioned2023-01-31T00:11:55Z
dc.identifier.issn1593-7879
dc.identifier.urihttp://hdl.handle.net/1885/284062
dc.description.abstractThe classical theory of preference among monetary bets represents people as expected utility maximizers with concave utility functions. Critics of this account often rely on assumptions about preferences over wide ranges of total wealth. We derive a prediction of the theory that bears on bets at any fixed level of wealth, and test the prediction behaviorally. Our results are discrepant with the classical account. Competing theories are also examined in light of our data.
dc.format.mimetypeapplication/pdf
dc.language.isoen_AU
dc.publisherRosenberg & Sellier
dc.rights© Fondazione-Rosselli 2005
dc.sourceMind and Society
dc.subjectGambling
dc.subjectRisk aversion
dc.subjectConcave utility function
dc.subjectExpected utility
dc.subjectProspect theory
dc.titleA Note on Concave Utility Functions
dc.typeJournal article
local.description.notesImported from ARIES
local.identifier.citationvolume4
dc.date.issued2005
local.identifier.absfor380399 - Economic theory not elsewhere classified
local.identifier.ariespublicationu9807482xPUB174
local.publisher.urlhttps://link.springer.com/
local.type.statusPublished Version
local.contributor.affiliationMonti, Martin M, Princeton University
local.contributor.affiliationGrant, Simon, College of Business and Economics, ANU
local.contributor.affiliationOsherson, Daniel N, Princeton University
local.description.embargo2099-12-31
local.bibliographicCitation.startpage85
local.bibliographicCitation.lastpage96
local.identifier.doi10.1007/s11299-005-0006-7
dc.date.updated2021-11-28T07:38:22Z
CollectionsANU Research Publications

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