Utility Function from Maximum Entropy Principle
Recently we used the maximum entropy principle for finding the price density in a multi agent insurance market. The result is similar to what the Buhlmann had obtained by maximizing the utility function. Here we begin with the price density that is derived by applying the maximum entropy principle t...
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| Format: | Article |
| Language: | English |
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MDPI AG
2006-01-01
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| Series: | Entropy |
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| Online Access: | http://www.mdpi.com/1099-4300/8/1/18/ |
| Summary: | Recently we used the maximum entropy principle for finding the price density in a multi agent insurance market. The result is similar to what the Buhlmann had obtained by maximizing the utility function. Here we begin with the price density that is derived by applying the maximum entropy principle to a conservative economic system (exchange market), then reverse the Buhlmann calculation to find the utility function and the risk aversion of agents with respect to this density. |
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| ISSN: | 1099-4300 |