When Utility Jumps: The Value of Having Cash in the Hand ()
ABSTRACT
Different theoretical explanations have been
developed for seemingly inconsistent actions that deal with varying levels of risk and time. We propose a
simple model of utility that unifies
these seemingly
separate phenomena, while not departing too far from the standard models of
utility maximization already in use. Our driving assumption is that preferences
over riskier outcomes discontinuously
depart from preferences under certainty; a jump from no risk to some risk is fundamentally
different from a
movement of some risk to more risk.
Share and Cite:
Rotthoff, K. and Coffey, B. (2018) When Utility Jumps: The Value of Having Cash in the Hand.
Theoretical Economics Letters,
8, 72-78. doi:
10.4236/tel.2018.81004.
Cited by
No relevant information.