exponential_uf: The exponential utility function.

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

Description

Exponential utility function is given by

U(oc) = 1 - exp(-alpha * oc), if alpha > 0,

U(oc) = oc, if alpha == 0, and

U(oc) = exp(-alpha * oc) - 1, if alpha < 0.

U is the utility and oc is the objective consequence of a gamble outcome. lambda is the loss aversion coefficient. alpha is an index of concavity. This function is defined on the entire real line (see Wakker, p. 80).

Usage

exponential_uf(par, oc)

Arguments

par	vector, parameter alpha for the utility function.
oc	numeric, the objective consequence

References

p. 309 Tversky, A., & Kahneman, D. (1992). Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and Uncertainty, 5(4), 297-323.

p. 466 Eqn. 2, 469, Birnbaum, M. H. (2008). New paradoxes of risky decision making. Psychological Review, 115(2), 463-501.

p. 80 Wakker, P. P. (2008). Explaining the characteristics of the power (CRRA) utility family. Health Economics, 17(12), 1329-1344.

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