degree of coinsurance than does the less risk averse consumer. These and other such
findings in a wide variety of decision settings lend considerable support for using A
u
(x),
the A-P measure of absolute risk aversion, both as a measure of the intensity or strength
of risk aversion, and as a way to compare risk aversion levels across decision makers.
There are some technical matters concerning A
u
(x) that are of interest. These stem
from analysis presented by Pratt (1964) showing how u(x) can be obtained from A
u
(x)
using a three step procedure. In the first step,
[−
A
u
(x)]=
u
′′
(x)
u
′
(x)
is integrated to obtain ...
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