mytest > help > Part 2. MM4XL Tools > 1. Strategic Tools > Decision Tree > 4. Anatomy of a Decision Tree Output Report > Technicalities > Utility Functions > Exponential Utility Function

Decision Tree

Exponential Utility Function

Perhaps the most common kind of utility function is the exponential one, defined by:

Decision Tree Software for Business and Management Model Making

where R is the Risk attitude coefficient of the decision-maker that can be set in the Tree Settings form (click on the tree root label). Small values of R indicate risk aversion. As R increases the risk tolerance of the decision-maker increases as well. The picture below shows four typical exponential utility curves:

Decision Tree Software for Business and Management Model Making

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