Utility Function u = x/(x + 1)

u(x) = x/(x + 1) is the simplest utility function with diminishing risk aversion limiting to zero. It provides us with a simple model like the model of pendulum in mechanics. One can use it to explain, for example, how mutually motivated insurance contracts are possible. In the present book, the mathematical features of that utility function are investigated. It has been argued that this function is unique and is between Bernoulli's logarithmic utility and the utility with constant risk aversion. This book is about utility theory, which is a part of decision theory. It is addressed for the mathematicians and economists, but some ideas concerning physics are suggested as well.

Autorentext

Jüri Eintalu was born in 1962. He has studied theoretical physics at Tartu University. Graduated as a PhD in the philosophy of science. He has written a book on the presuppositions of the problem of induction. Informally, he has studied ethics, decision theory and game theory. He may win you in chess.