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# A Generalization of Pratt-Arrow Measure to Nonexpected-Utility Preferences and Inseparable Probability and Utility

@article{Nau2003AGO, title={A Generalization of Pratt-Arrow Measure to Nonexpected-Utility Preferences and Inseparable Probability and Utility}, author={Robert F. Nau}, journal={Management Science}, year={2003}, volume={49}, pages={1089-1104} }

- Published 2003 in Management Science
DOI:10.1287/mnsc.49.8.1089.16398

The Pratt-Arrow measure of local risk aversion is generalized for the n-dimensional state-preference model of choice under uncertainty in which the decision maker may have inseparable subjective probabilities and utilities, unobservable stochastic prior wealth, and/or smooth nonexpected-utility preferences. Local risk aversion is measured by the matrix of derivatives of the decision maker’s risk-neutral probabilities, without reference to true subjective probabilities or riskless wealth… CONTINUE READING

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