Explaining the characteristics of the power (CRRA) utility family.
The power family, also known as the family of constant relative risk aversion (CRRA), is the most widely used parametric family for fitting utility functions to data. Its characteristics have, however, been little understood, and have led to numerous misunderstandings. This paper explains these characteristics in a manner accessible to a wide audience.
Wakker
Peter P
PP
Econometric Institute, Erasmus University Rotterdam, Rotterdam, The Netherlands. Wakker@few.eur.nl
D006801:Humans; D008954:Models, Biological; D015233:Models, Statistical; D011788:Quality of Life; D012306:Risk