Explaining the characteristics of the power (CRRA) utility family

Health Econ. 2008 Dec;17(12):1329-44. doi: 10.1002/hec.1331.

Abstract

The power family, also known as the family of constant relative risk aversion (CRRA), is the most widely used parametric family for fitting utility functions to data. Its characteristics have, however, been little understood, and have led to numerous misunderstandings. This paper explains these characteristics in a manner accessible to a wide audience.

MeSH terms

  • Humans
  • Models, Biological
  • Models, Statistical*
  • Quality of Life*
  • Risk*