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Benefit and distance functions

Article Abstract:

The relationship between the input distance function of R.W. Shephard and the benefit function of D.G. Luenberger, both of which are directional representation of preferences, is examined. It is also shown how one can be derived from the other. Luenberger's benefit function can be recognized in a production context as a directional input distance function, both of which are complete representations of the technology. D. McFadden's composition rules for input sets and input distance functions are extended to the directional input distance function.

Research, Industrial efficiency, Economic efficiency, Industrial productivity, Production (Economics)

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Invariant risk attitudes

Article Abstract:

Concepts of constant absolute risk aversion and constant relative risk aversion have proved useful in the analysis of choice under uncertainty. Invariant risk aversion is closely related to the possibility of representing preferences over state-contingent income vectors in terms of two parameters, the mean and a linearly homogenous, translation-invariant index of riskiness.

Consumer preferences

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Search and Knightian uncertainty

Article Abstract:

The answer to the issue depending on whether an increase in 'uncertainty' is an increase in risk or that in true uncertainty in the sense of Frank Knight is discussed. It shows that in a general framework with an increase in risk increases in reservation wage, an increase in Knightian uncertainty reduces it.

Uncertainty

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