Question
A person has a quadratic utility function: u(w) = w- Bw2, where > 0 is some constant. (Assume the wealth levels are such that
A person has a quadratic utility function: u(w) = w- Bw2, where > 0 is some constant. (Assume the wealth levels are such that 1 - 2w > 0, so that marginal utility is positive. What is the Arrow-Pratt measure of risk aversion for this person. Is this function DARA? IARA?
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