---
title: "utility function"
type: concept
related: [Power Utility, Expected Utility Of Wealth]
source: https://www.jemoka.com/posts/kbhutility_function/
confidence: high
status: active
---

quadratic utility \begin{equation} U(x) = \lambda x - x^{2} \end{equation}
where, \(\lambda&gt;0\) controls risk aversion: as risk increases, utility increases concavely, then eventually utility falls
exponential utility \begin{equation} U(x) = 1 - e^{-\lambda x} \end{equation}
where \(\lambda &gt;0\) controls risk aversion. This is usually not plausible as utility because people&rsquo;s utility doesn&rsquo;t grow exponentially ever
power utility see power utility
