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Is the expected utility the inverse of the utility function?

Economics Asked by Teko JR on April 21, 2021

Can somebody explain to me if that it’s true and also graphically explain it?

One Answer

This is trivially not true. Consider simple example of utility:

$$u(x) = x^{1/2}$$

Expected utility $E(u(x)) = E[x^{1/2}]$

Inverse utility is $u^{-1} implies x = u^2 $

clearly generally $E(u) neq u^{-1} $.

Answered by 1muflon1 on April 21, 2021

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