Title

The monetary utility premium and interpersonal comparisons

Document Type

Journal article

Source Publication

Economics Letters

Publication Date

11-1-2014

Volume

125

Issue

2

First Page

257

Last Page

260

Keywords

Utility premium, Risk aversion, Higher-degree risk aversion, Comparative risk aversion

Abstract

The utility premium is generally defined as the pain or reduction in expected utility caused by an nth-degree risk increase, where n≥2. While it is a very useful concept in understanding a decision maker’s choice in uncertain situations, the utility premium is not interpersonally comparable. This note shows that the monetary utility premium–the utility premium divided by the expected marginal utility at the random starting wealth–is interpersonally comparable, and the comparison is characterized by Ross more risk aversion of the corresponding degree.

DOI

10.1016/j.econlet.2014.09.006

Print ISSN

01651765

E-ISSN

18737374

Publisher Statement

Copyright © 2014 Elsevier B.V.

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Full-text Version

Publisher’s Version

Recommended Citation

Li, J., & Liu, L. (2014). The monetary utility premium and interpersonal comparisons. Economics Letters, 152(2), 257-260. doi: 10.1016/j.econlet.2014.09.006