The Utility of Wealth

  title={The Utility of Wealth},
  author={Harry M. Markowitz},
  journal={Journal of Political Economy},
  pages={151 - 158}
  • H. Markowitz
  • Published 1 April 1952
  • Economics
  • Journal of Political Economy
(b) acts in the face of known odds so as to maximize expected utility. (2) The utility function is as illustrated in Figure i. We may assume it to be a continuous curve with at least first and second derivatives.5 Let U be utility and W be wealth. Below some point A, (a2U)/(0W2) < o; between A and B, (02U)/Q(W2) > o; above B, (02U)/(0W2) < a. To tell geometrically whether or not an individual would prefer Wo with certainty or a "fair"6 chance of rising to WI or falling to 
The Utility of Wealth in an Upper- and Lower-Partial Moment Fabric
Utility should be a function consisting of two autonomous sections both positive and negative, that needs to be configurable to the individuals it is designed to represent. This is achieved throughExpand
Reference Wealth Effects in Sequential Choice
It is argued that in order to accommodate experimentally-observed choice patterns, it is not enough to model the utility function as being dependent on changes from a reference wealth point. Instead,Expand
Expected Utility Hypothesis
The expected utility hypothesis of behaviour towards risk is essentially the hypothesis that the individual decision–maker possesses (or acts as if possessing) a ‘von Neumann-Morgenstern utilityExpand
Risk Behavior Under Linear Utility Function
An uncertainly model based on money-market imperfections and on linear utility functions (of money) is reformulated so as to be directly with the traditional non-linear utility approach. We postulateExpand
Debates on the Utility of Risk. A Look Back to Move Forward
This paper explores the reasons for the eclipse of the utility of chance and the associated sudden rise to dominance of the expected utility procedure between 1948 and 1952. In its omission of theExpand
Realistic utility versus game utility: a proposal for dealing with the spread of uncertain prospects
The author develops the properties and implications of a proposal, concerning a summary statistic of the random prospect of utilities. Following a suggestion of Allais, such a statistic is increasingExpand
Range Utility Theory
We introduce range utility theory for decisions under risk. Two functions are implicated in the representation of preferences: a traditional utility function for wealth---or changes in wealth---and aExpand
It is shown that a utility function can be specified that can account for all the normal patterns of behavior associated with uncertain choice,but which is also more general in that it is capable ofExpand
Relativity, Rank and the Utility of Income
Relative utility has become an important concept in several disjoint areas of economics. I present a cardinal model of income utility based on the supposition that agents care about their rank in theExpand
Measuring the Utility of Losses by Means of the Tradeoff Method
This paper investigates the shape of the utility function for losses. From a rational point of view it can be argued that utility should be concave. Empirically, measurements of the utility forExpand