
Economics Economics Forum  Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance 
 LinkBack  Thread Tools  Display Modes 
January 2nd, 2017, 02:40 AM  #1 
Member Joined: Apr 2013 Posts: 36 Thanks: 0  Utility on negative wealth
Hi all, can anyone kindly explain the intuition/interpretation behind defining utility on negative wealth (such as exponential utility)? Thank you! Natt Last edited by skipjack; January 2nd, 2017 at 02:55 AM. 
January 2nd, 2017, 06:46 AM  #2 
Senior Member Joined: May 2016 From: USA Posts: 923 Thanks: 369 
First, there is nothing that precludes the functions of economic theory from being defined piecewise. It is usual in economics that interest is focused on a very small domain (the neighborhood of a point of intersection or of tangency for example) so that the nature of the function outside that restricted domain is irrelevant. Only the very best economists manage to remember consistently that the functions of economic theory are highly simplified idealizations. Second, the opposite of wealth is debt. Just ask a few graduates about how warm and fuzzy they feel about student loan debt. 

Tags 
negative, utility, wealth 
Thread Tools  
Display Modes  

Similar Threads  
Thread  Thread Starter  Forum  Replies  Last Post 
SuperRich Wealth Distribution  BigDaddy  Economics  0  September 14th, 2016 01:41 PM 
discounted negative utility function  natt010  Economics  0  November 26th, 2014 12:17 AM 