utility <- function(income, rho, scale=FALSE) {
income <- pmax(1, income)
if (rho==1) {
u <- log(income)
} else {
u <- (income ^ (1 - rho)) / (1 - rho)
}
if (scale) {
u <- u - min(u)
u <- u / max(u)
}
u
}
ce_utility <- function(utility, rho){
u <- mean(utility)
if (rho == 1) {
exp(u)
} else {
((1-rho) * u) ^ (1/(1-rho))
}
}
ce_income <- function(income, rho){
u <- utility(income, rho, scale=FALSE)
ce_utility(u, rho)
}
mqs <- function(ce_insured, ce_not_insured) {
m <- sign(ce_insured - ce_not_insured) + 2
c("bad", "neutral", "good")[m]
}
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