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Expo-Power Utility: A 'Flexible' Form for Absolute and Relative Risk Aversion
American Journal of Agricultural Economics
Vol. 75, No. 4 (Nov., 1993), pp. 905-913
Stable URL: http://www.jstor.org/stable/1243978
Page Count: 9
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A new utility function, which I call expo-power, is proposed that exhibits decreasing, constant, or increasing absolute risk aversion and decreasing or increasing relative risk aversion, depending on parameter values. Numerical analysis suggests that the expo-power function performs well in incorporating these risk preference structures, and that arbitrary risk preference specifications may lead to biased risk response estimates.
American Journal of Agricultural Economics © 1993 Agricultural & Applied Economics Association