Risk aversion A lottery with monetary payoffs continuous quantity of money x is a random variable Accumulated distribution function F: R>[0,1] V N-M expected utility function U(F)=u(x)dF(x) where u() is Bernoulli utility function u(is increasing continuous and boundedRisk aversion • A lottery with monetary payoffs : – continuous quantity of money is a random variable – Accumulated distribution function: – v.N-M expected utility function where is Bernoulli utility function. • is increasing, continuous and bounded. x F : [0,1]  → U F u x dF x ( ) ( ) ( ) =  u(.) u(.)