Description Usage Arguments References
The expo-power utility function is given by
U(oc) = gamma - exp(-beta * oc^alpha), if oc >= 0 and
U(oc) = -lambda * gamma - exp(-beta * (-oc)^alpha), if oc < 0.
U is the utility and oc is the objective consequence of a gamble outcome. lambda is the loss aversion coefficient. The Tversky & Kahneman (1992) assumption has also been made, namely
U(-oc) = -lambda * U(oc) where oc >= 0.
Parameter restrictions from Saha (1993) are:
gamma > 1,
alpha != 0,
beta != 0, and
alpha * beta > 1.
1 | expo_power_uf(par, oc)
|
par |
vector, parameters alpha, beta, gamma and lambda for the utility function. |
oc |
numeric, the objective consequence |
Saha, A. (1993). Expo-power utility: A 'flexible' form for absolute and relative risk aversion. American Journal of Agricultural Economics, 75(4), 905-913.
Peel, D. A., & Zhang, J. (2009). The expo-power value function as a candidate for the work-horse specification in parametric versions of cumulative prospect theory. Economics Letters, 105(3), 326-329.
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