expo_power_uf: The expo-power utility function.

In gary-au/pt: Computational models for prospect theory and other theories of risky decision making

Description

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.

Usage

expo_power_uf(par, oc)

Arguments

par	vector, parameters alpha, beta, gamma and lambda for the utility function.
oc	numeric, the objective consequence

References

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.

gary-au/pt documentation built on May 16, 2019, 5:41 p.m.