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A note on concave utility functions

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Abstract

The classical theory of preference among monetary bets represents people as expected utility maximizers with concave utility functions. Critics of this account often rely on assumptions about preferences over wide ranges of total wealth. We derive a prediction of the theory that bears on bets at any fixed level of wealth, and test the prediction behaviorally. Our results are discrepant with the classical account. Competing theories are also examined in light of our data.

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Authors and Affiliations

  1. Department of Psychology, Princeton University, Green Hall, Princeton, NJ, 08544, USA

    Martin M. Monti & Daniel N. Osherson

  2. Department of Economics, Rice University, Baker Hall, Houston, TX, 77005, USA

    Simon Grant

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  1. Martin M. Monti
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  2. Simon Grant
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  3. Daniel N. Osherson
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Correspondence to Martin M. Monti.

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Monti, M.M., Grant, S. & Osherson, D.N. A note on concave utility functions. Mind & Society 4, 85–96 (2005). https://doi.org/10.1007/s11299-005-0006-7

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  • DOI: https://doi.org/10.1007/s11299-005-0006-7

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