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A buying price equation for lotteries identical to that implied by exponential utility is derived using a constraint on the probability of ruin for indefinitely repeated play. Applications explored are utility parameter assessment and the axiom-free motivation of a decision rule indistinguishable from maximizing expected exponential utility.
Systems, Man and Cybernetics, IEEE Transactions on (Volume:SMC-14 , Issue: 5 )
Date of Publication: Sept.-Oct. 1984