The monetary utility premium and interpersonal comparisons

摘要

The utility premium is generally defined as the pain or reduction in expected utility caused by an nth-degree risk increase, where n ≥ 2. While it is a very useful concept in understanding a decision maker's choice in uncertain situations, the utility premium is not interpersonally comparable. This note shows that the monetary utility premium - the utility premium divided by the expected marginal utility at the random starting wealth - is interpersonally comparable, and the comparison is characterized by Ross more risk aversion of the corresponding degree.