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Utility function von Neumann Morgenstern

  1. May 4, 2016 #1
    1. The problem statement, all variables and given/known data
    I have a financial intermediation model with delegated monitoring to a venture capitalist. At the moment all participants are risk neutral and i want to introduce risk aversion to the model. Therefore i need a utility function under the von neumann morgenstern criteria, ie. concavity and continous
    v= future project realisation
    B= private benefits
    ph=probability for high effort
    pl=probability for low effort


    2. Relevant equations
    incentive constraint of the entrepreneur : ph times v >= pl times v + B

    3. The attempt at a solution
    For risk aversion i need to introduce here utility function in a specific form, but i am not sure which to take
     
  2. jcsd
  3. May 9, 2016 #2
    Thanks for the post! This is an automated courtesy bump. Sorry you aren't generating responses at the moment. Do you have any further information, come to any new conclusions or is it possible to reword the post?
     
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