Talk:Exponential utility

Formula

The formula is currently $u(c)=1-e^{-ac}/a$, which is not the most convenient form. The most used form of this utility function is when only risk-aversion ($a>0$) is allowed and the formula is $u(c)=1-e^{-ac}$. The 1 is only for the convenience of having non-negative utility. If we want to allow non-risk-aversion behavior then we to allow for $a\leq 0$. To keep utility increasing in c that means we need to divide by a. But in order to maintain the reason for the 1 we need to define it as $u(c)=(1-e^{-ac})/a$ so that it stays positive (this is not the case with the current formula). We also need to define the formula for $a=0$ (risk-neutrality) which should be $u(c)=c$. I think we should note in the article the simple (only risk-aversion) formula and then the 2-case setup allowing any risk preference. --Bequw (talk) 22:09, 25 November 2014 (UTC)