16.7 Risk Preferences

The Risk Preferences Tree Preferences category allows you to determine whether to use risk preferences in expected value calculations or not. Refer to the Utility Functions and Risk Preferences Chapter for more information.

• Use risk preference function: Check this box to calculate the model based on a risk function rather than expected value.

• Risk function: Select either a constant or non-constant risk function.

16.7.1  Constant Risk Preference Assessment

The Constant Risk Preference Assessment Tree Preferences category allows you to enter the risk preference coefficient.

• Risk preference coefficient: Enter a value that defines an amount you are willing to risk for the lottery above. This is used to create a risk preference curve. (More details are found in the Risk Preferences Chapter).

16.7.2  Non-Constant Risk Preference Assessment

The Non-Constant Risk Preference Assessment Tree Preferences category allows you to enter a series of risk values to generate a non-constant risk preference curve.