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Title: |
Risk Behavior under Linear Utility Function |
| Author: |
Kim, Young
Chin; Yoon, Bong Joon |
| Author
Affiliation: |
N IL U; SUNY,
Binghamton |
| Source: |
International Economic Journal, Autumn 1987, v. 1, no. 3, pp. 49-56 |
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Publication Date: |
Autumn 1987 |
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Abstract: |
An uncertainty model based on money-market
imperfections and on linear utility function (of money) is reformulated
so as to be directly comparable with the traditional nonlinear utility
approach. We postulate that the utility is a linear function of
"augmented" income. But the augmented income is a non-linear function of
the nominal income, due to differential interest rates. This new
formulation is shown to generate all the essential implications of the
traditional approach as in Friedman and Savage, Markowitz, Arrow, and
Pratt. |
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