If x is a monetary value (a payoff if positive,a cost if negative),U(x)the utility of this value,and R 0 is an adjustable parameter called the risk tolerance,then the function U(x)= 1 - is called
A)Poisson utility
B)exponential utility
C)binomial utility
D)normal utility

Question

If x is a monetary value (a payoff if positive,a cost if negative),U(x)the utility of this value,and R > 0 is an adjustable parameter called the risk tolerance,then the function U(x)= 1 -  is called
A)Poisson utility 
B)exponential utility 
C)binomial utility 
D)normal utility

Quizplus · Accepted Answer

The given function U(x) is the formula for exponential utility, which is commonly used to model decision-making under risk or uncertainty. The adjustable parameter R represents the individual's risk aversion, where higher values indicate greater aversion to risk. Therefore, the best choice is B, exponential utility.

If X Is a Monetary Value (A Payoff If Positive,a