Utility Function from Maximum Entropy Principle

Amir H. DaroonehSufi Institute, P.O.Box 45195-1547, Zanjan, IranandDepartment of Physics, Zanjan University, P.O.Box 45196-313, Zanjan, Iran.E-mail: darooneh@mail.znu.ac.irReceived: 4 December 2005 / Accepted: 30 January 2006 / Published: 31 January 2006Abstract: Recently we used the maximum entropy principle for finding the price density in amulti agent insurance market. The result is similar to what the Buhlmann had obtained by max-imizing the utility function. Here we begin with the price density that is derived by applying themaximum entropy principle to a conservative economic system (exchange market), then reversethe Buhlmann calculation to find the utility function and the risk aversion of agents with respectto this density.Keywords: Utility Function, Price Density, Maximum Entropy Principle, Risk Aversion.PACS codes:89.65.Gh, 05.20.-y.

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