University of South Bohemia in České Budějovice
decision making under risk, decision maker's attitude toward risk, utility function, certainty
The paper deals with two specific types of utility functions displaying decision maker's risk aversion at expressing the utility of monetary values. These functions are following: w(c) = 1 – e-x/R, u(x) = ln(x + R), where x is a monetary value and R is a constant expressing the degree of risk tolerance. Basic properties of the above mentioned functions and formulas for calculations of certainty equivalents and risk premiums are derived. Some properties of the analyzed functions are numerically and graphically illustrated by concrete examples.
Acta Universitatits Bohemiae Meridionalis (ISSN 1212-3285, online 2336-4297) University of South Bohemia in České Budějovice, Faculty of Economics Studentská 13, 370 05 České Budějovice, Czech Republic Contact: firstname.lastname@example.org; Phone Number: +420 38 777 2486