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The Stone–Geary utility function was first derived by Roy C. Geary, [2] in a comment on earlier work by Lawrence Klein and Herman Rubin. [3] Richard Stone was the first to estimate the Linear Expenditure System.
A consumer's indirect utility (,) can be computed from their utility function (), defined over vectors of quantities of consumable goods, by first computing the most preferred affordable bundle, represented by the vector (,) by solving the utility maximization problem, and second, computing the utility ((,)) the consumer derives from that ...
In microeconomics, the expenditure function represents the minimum amount of expenditure needed to achieve a given level of utility, given a utility function and the prices of goods. Formally, if there is a utility function u {\displaystyle u} that describes preferences over n goods, the expenditure function e ( p , u ∗ ) {\displaystyle e(p,u ...
E.g., the commodity is a heterogeneous resource, such as land. Then, the utility functions are not functions of a finite number of variables, but rather set functions defined on Borel subsets of the land. The natural generalization of a linear utility function to that model is an additive set function.
Exponential utility implies constant absolute risk aversion (CARA), with coefficient of absolute risk aversion equal to a constant: ″ ′ =. In the standard model of one risky asset and one risk-free asset, [1] [2] for example, this feature implies that the optimal holding of the risky asset is independent of the level of initial wealth; thus on the margin any additional wealth would be ...
In economics, Epstein–Zin preferences refers to a specification of recursive utility. A recursive utility function can be constructed from two components,: a time aggregator that characterizes preferences in the absence of uncertainty and a risk aggregator that defines the certainty equivalent function that characterizes preferences over static gambles and is used to aggregate the risk ...
Isoelastic utility for different values of . When > the curve approaches the horizontal axis asymptotically from below with no lower bound.. In economics, the isoelastic function for utility, also known as the isoelastic utility function, or power utility function, is used to express utility in terms of consumption or some other economic variable that a decision-maker is concerned with.
Physicists' interest in the social sciences is not new (see e.g., [1]); Daniel Bernoulli, as an example, was the originator of utility-based preferences.One of the founders of neoclassical economic theory, former Yale University Professor of Economics Irving Fisher, was originally trained under the renowned Yale physicist, Josiah Willard Gibbs. [2]