reversed. For the linear or risk neutral utility function,
Eu
(
˜z
)
=u
(µ
)
for all random
variables. Since u(z) is unique to a positive linear transformation, the most often used
utility function to represent risk neutrality is the identity function u(z) = z. Risk neutral
decision makers choose among random variables on the basis of
E
[˜
z
]=
µ
, their mean
values. Thus, the M-V and EU decision models are the same in this regard. Also like the
M-V model, the EU decision model allows for decision makers who are neither risk
averse, nor risk loving, nor risk neutral; that is the utility function u(z) can be neither ...
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