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.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
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