For a utility function that exhibits decreasing martingale utility,the martingale utility is high when:

Question

Quizplus · Accepted Answer

Decreasing marginal utility implies that as consumption increases, the additional satisfaction (utility) gained from consuming an additional unit decreases. Therefore, when consumption and utility are low, the marginal utility is high, reflecting a high sensitivity to changes in consumption at lower levels of consumption.

For a Utility Function That Exhibits Decreasing Martingale Utility,the Martingale