Isoelastic Utility - Special Cases

Special Cases

  • : this corresponds to risk neutrality, because utility is linear in c.
  • : by virtue of l'Hôpital's rule, the limit of is as goes to one:
which justifies the convention of using the limiting value u(c) = log c when .
  • → : this is the case of infinite risk aversion.

Read more about this topic:  Isoelastic Utility

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