On additive principles of zero utility (Q1069642)
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scientific article; zbMATH DE number 3936331
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| English | On additive principles of zero utility |
scientific article; zbMATH DE number 3936331 |
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On additive principles of zero utility (English)
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1985
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In the first part a fifth order approximation for the premium of a small risk is given; this formula is used to show that additivity for all x implies linear or exponential utility. The same conclusion is obtained from the weaker assumption of additivity for only one value of x (second part). For the proof one considers a functional equation for the utility function (that has been derived earlier); it has a two-parametric family of solutions, some of which are quite exotic.
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principles of premium calculation
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risk aversion
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fifth order approximation
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premium of a small risk
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additivity
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linear or exponential utility
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functional equation
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