4 Expected utility maximization 4.1 Comparative statics with respect to absolute risk aversion Suppose there are two agents with utility function u1, u2. uj is more absolute risk averse than u2, namely, the Arrow- Pratt absolute risk aversion coefficient Au (w) > Auz (w) for all w. (See Proposition 5, Lecture 1) The market contains one risky asset and one risk-free asset. If two agents have the same initial endowment wo, show that the expected utility maximizing allocation satisfies lat| r. First consider the case when ui(rw) = u2(rw), u'i(rw) = uw(rw). In general consider a linear transformation ul (w) = kul (w) + b such that u1, u2 satisfies the requirement.)