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Utility Curves

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What types of utility curves (increasing, decreasing, or constant marginal utility of wealth) are generally associated with each of the following attitudes toward risk:

(a) risk-averse,
(b) risk-neutral, and
(c) risk-seeking?

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Solution Summary

The types of utility Curves associated with risk in marginal utility of wealth are examined.

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a) risk averse = decreasing
b) risk neutral = constant
c) risk loving = increasing


Think of this example, you are given the chance to enter a bid, where you have 50% chance of getting $1mil, and 50% chance of getting nothing. Alternatively, you ...

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