Houjun Liu

utility function

quadratic utility

\begin{equation} U(x) = \lambda x - x^{2} \end{equation}

where, \(\lambda>0\) controls risk aversion: as risk increases, utility increases concavely, then eventually utility falls

exponential utility

\begin{equation} U(x) = 1 - e^{-\lambda x} \end{equation}

where \(\lambda >0\) controls risk aversion. This is usually not plausible as utility because people’s utility doesn’t grow exponentially ever

power utility

see power utility