Concave Utilities are Distinguished by Their Optimal Strategies,
Abstract
Mossin and Samuelson have shown that different utilities can lead to different optimal strategies; in particular the optimal investment strategy for utility log x is not necessarily the optimal strategy for utility (x sup gamma)/gamma, gamma not = 0, as was noted by Thorp for gamma = 1. These results are special cases of a general result, of fundamental importance for utility theory, which the authors establish here: If two strictly increasing concave utilities are not equivalent, then there is a one-stage investment setting, which may be chosen to consist only of cash and a two-valued random variable, in which these utilities have different optimal strategies. Variations on these results are given and some problems are discussed. (Author)
Document Details
- Document Type
- Technical Report
- Publication Date
- Feb 01, 1973
- Accession Number
- AD0755872
Entities
People
- Edward Thorp
- Robert Whitley
Organizations
- University of California, Irvine