Abstract
AbstractNon-linear utility theory, which generalizes the expected utility theory of von Neumann and Morgenstern, provides greater iSexibility for the analysis of preference and choice in risky situations. This paper reviews a recently developed non-linear utility theory and some of its special cases, then considers elements of risk analysis for the new theory in monetary contexts. It analyses the meanings of signs of derivatives ofthe utility function, which has the bivariate form o(x,y), instead ofthe univariate form u(x) ofthe linear theory, then comments on stochastic dominance, certainty equivalence, and the preference-reversal phenomenon in the non-linear setting.
Published Version
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