Arbeitspapier
Expected Utility and Catastrophic Risk
An expected utility based cost-benefit analysis is in general fragile to its distributional assumptions. We derive necessary and sufficient conditions on the utility function of the expected utility model to avoid this. The conditions ensure that expected (marginal) utility remains finite also under heavy-tailed distributional assumptions. Our results are context-free and are relevant to many fields encountering catastrophic risk analysis, such as, perhaps most noticeably, insurance and risk management.
- Language
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Englisch
- Bibliographic citation
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Series: Tinbergen Institute Discussion Paper ; No. 14-133/III
- Classification
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Wirtschaft
Allocative Efficiency; Cost-Benefit Analysis
Criteria for Decision-Making under Risk and Uncertainty
General Financial Markets: General (includes Measurement and Data)
Financial Institutions and Services: General
- Subject
-
Expected utility
Catastrophe
Cost-benefit analysis
Risk management
Power utility
Exponential utility
Heavy tails
- Event
-
Geistige Schöpfung
- (who)
-
Ikefuji, Masako
Laeven, Roger
Magnus, Jan
Muris, Chris
- Event
-
Veröffentlichung
- (who)
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Tinbergen Institute
- (where)
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Amsterdam and Rotterdam
- (when)
-
2014
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Ikefuji, Masako
- Laeven, Roger
- Magnus, Jan
- Muris, Chris
- Tinbergen Institute
Time of origin
- 2014
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