The nonconcavity of money-metric utility: A new formulation and proof

M. Ali Khan; Edward Schlee

doi:10.1016/j.econlet.2017.02.007

The nonconcavity of money-metric utility: A new formulation and proof

M. Ali Khan, Edward Schlee

Economics

Research output: Contribution to journal › Article › peer-review

4 Scopus citations

Abstract

We offer a new, succinct proof of the fact that the money metric utility is concave for any preference relation representable by a concave function if and only if the indirect utility is affine in wealth. Our proof exploits the existence of a least concave representation established in Debreu (1976), and brings into salience the observation that the money-metric utility to be itself a least-concave representation of the preferences if it is concave. This observation is apparently new.

Original language	English (US)
Pages (from-to)	10-12
Number of pages	3
Journal	Economics Letters
Volume	154
DOIs	https://doi.org/10.1016/j.econlet.2017.02.007
State	Published - May 1 2017

Keywords

Expenditure function
Least-concave representation
Money metric

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.econlet.2017.02.007

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abstract = "We offer a new, succinct proof of the fact that the money metric utility is concave for any preference relation representable by a concave function if and only if the indirect utility is affine in wealth. Our proof exploits the existence of a least concave representation established in Debreu (1976), and brings into salience the observation that the money-metric utility to be itself a least-concave representation of the preferences if it is concave. This observation is apparently new.",

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author = "{Ali Khan}, M. and Edward Schlee",

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AB - We offer a new, succinct proof of the fact that the money metric utility is concave for any preference relation representable by a concave function if and only if the indirect utility is affine in wealth. Our proof exploits the existence of a least concave representation established in Debreu (1976), and brings into salience the observation that the money-metric utility to be itself a least-concave representation of the preferences if it is concave. This observation is apparently new.

KW - Expenditure function

KW - Least-concave representation

KW - Money metric

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JF - Economics Letters

ER -

The nonconcavity of money-metric utility: A new formulation and proof

Abstract

Keywords

ASJC Scopus subject areas

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