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Erscheinungsjahr: 
2014
Schriftenreihe/Nr.: 
Tinbergen Institute Discussion Paper No. 14-133/III
Verlag: 
Tinbergen Institute, Amsterdam and Rotterdam
Zusammenfassung: 
An expected utility based cost-benefit analysis is in general fragile to its distributional assumptions. We derive necessary and sufficient conditions on the utility function of the expected utility model to avoid this. The conditions ensure that expected (marginal) utility remains finite also under heavy-tailed distributional assumptions. Our results are context-free and are relevant to many fields encountering catastrophic risk analysis, such as, perhaps most noticeably, insurance and risk management.
Schlagwörter: 
Expected utility
Catastrophe
Cost-benefit analysis
Risk management
Power utility
Exponential utility
Heavy tails
JEL: 
D61
D81
G10
G20
Q05
Dokumentart: 
Working Paper
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