Question: 7.2. Let W, U : R20 -> R be increasing, strictly concave, twice continuously differentiable utility functions such that U and W have the same

7.2. Let W, U : R20 -> R be increasing, strictly concave, twice continuously differentiable utility functions such that U and W have the same continuous coefficient of absolute risk aversion. Show that there are a, b E R such that a > 0 and W = aU + b. Do not assume that the coefficient of absolute risk aversion in question is constant! Hint: take the derivative of the function (W'/U')' and show that it is always 0

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

7.1. Let U : R20 -> R be an increasing, strictly concave, twice continuously differentiable utility function. Let X and Y be random variables such that E(U(X)) > E(U(Y) ) and let a, be R such that a...

Solve the all....with Right answers Question 2 Consider a finite society ] = {1,..., I), where the preferences of the individuals are repre- sented by the utility functions (ul : R4 - R)iej. Assume...

Question 3 Consider an economy with two goods, a private good and a public good subject to congestion. {hie unit of private good can be transformed into a unit of public good : ifs units of private...

Qq123...answer please (a) Represent the IG procedure as an extensive-form game-frame (a sufficiently informative sketch is enough; no need to write the payoffs). (b) Represent the SP procedure as an...

Necessary information has been given for the following questions. Consider the following Diamond economy (Le., the Overlapping Generations Model: OLG). In every period f with t = 0, 1,2, .., there...

Solve it and submitted only correct answers Consider the following Diamond economy (Le., the Overlapping Generations Model: OLG). In every period t with t = 0, 1,2, ..., there always exist two types...

&+ help here plss. 9. One-shot DMP model (inspired by Albrecht, Navaro and Vroman (2010]) Time: One period Demography: A unit mass continuum of workers and a larger mass of firms who can create...

1. A player throws a fair die and simultaneously flips a fair coin. If the coin lands heads, then she wins twice, and if tails, then one-half of the value that appears on the die. Determine her...

Q0. Assume the income elasticitity of labor supply is zero. Let " w denote the compensated elasticity of labor supply with respect to the real wage. Let the distribution of income generated by the...

below are my questions..its compl,ete question11 1. Ann is ambiguity-averse and has constant absolute risk aversion a. There is a stock that pays y per unit where y ~ N (u, s') where u e [u, p] is...

A closed system interacts with its surroundings and the following data are supplied: Wsh = 10 kW, Wel = 5 kW, Q = -5 kW. (a) If there are no other interactions, determine dE/dt. (b) Is this system...

Suppose you are at the grocery store to purchase bagels (x) and doughnuts (y) for a breakfast with your friends. Let the group's preferences over bagels and doughnuts be represented by u(x, y) = 5x +...

3 . . . a fundamental attribute of corporate personality . . . is that the corporation is a legal entity distinct from its members Gower. Which do you consider are the two outstanding advantages of...

A hula hoop and solid disc of equal radii are rolled, from rest and without slipping, down an incline plane. Which one will reach the bottom of the inclined plane first? Explain.

What is the difference between a direct and an indirect distribution channel?

Understand the importance of distribution to successful sport marketing.

Specify the importance of the sport facility as place.