Expected Utility, mu-sigma Preferences, and Linear Distribution Classes: A Further Result.

This article is an extension of Meyer and Sinn's results on the representation of arbitrary von Neumann-Morgenstern functions in "mu-delta" space when the probability distributions to be compared belong to linear distribution class. It shows that, when absolute risk aversion decreases, stays constant, or increases not too fast, an increase in "delta," given "mu," increases the indifference curve slope: increased riskiness increases the required marginal compensation for risk when risk is measured by the standard deviation of wealth or income. Copyright 1990 by Kluwer Academic Publishers