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   Logwealth Utility Function
   















 

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Logwealth Utility Function

A function relating utility to wealth first proposed by Daniel Bernoulli who assumed that utility is equal to the natural logarithm of wealth. The logwealth utility function implies that a gain in wealth conveys a smaller increase to utility than the reduction in utility imparted by a loss in wealth of equal magnitude. Risk aversion follows from this asymmetry.

Glossary * L