This note proposes the Burr utility function. Burr utility is a flexible two-parameter family that behaves approximately power-like (CRRA) remote from the origin, while exhibiting exponential-like (CARA) features near the origin. It thus avoids the extreme behavior of the power family near the...

This note reconsiders the classical problem of precautionary saving in the presence of an interest-rate risk, and provides a new interpretation of the threshold of 2 for the relative prudence index, which characterizes the necessary and sufficient condition for precautionary saving

The St. Petersburg paradox is one of the oldest challenges of expected value theory. Thus far, explanations of the paradox aim at small probabilities being perceived as zero and the boundedness of utility of the outcome. This paper provides experimental results showing that neither diminishing...