Utility Theory :
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A way of representing an individual’s preferences between two competing desires.
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Individuals seek to reach their highest level of satisfaction or utility.
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Individuals are generally risk-averse, that is, they require increasingly large increments of wealth to compensate them for increasing their risk.
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Risk aversion = an unwillingness to pay as much as the expected value of a risky project to invest (or wager) in it.
 
						 
				


 
						

