Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
477942 | European Journal of Operational Research | 2006 | 14 Pages |
Abstract
This paper describes a parametric family of utility functions for decision analysis. The parameterization embeds the HARA class in a four-parameter representation for the risk aversion function. The resulting utility functions can have only four shapes: concave, convex, S-shaped, and reverse S-shaped. This makes the family suited for both expected utility and prospect theory. The paper also describes an alternative technique to estimate the four parameters from elicited utilities, which is simpler than standard fitting by minimization of the mean quadratic error.
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Marco LiCalzi, Annamaria Sorato,