The Shape of Utility Functions and Organizational Behavior

Pennings, Joost M. E.; Smidts, A.

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The Shape of Utility Functions and Organizational Behavior

21 Pages Posted: 20 Feb 2003

See all articles by Joost M. E. Pennings

Joost M. E. Pennings

Maastricht University; Wageningen University and Research (WUR); University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics

A. Smidts

Erasmus Research Institute of Management (ERIM)

There are 2 versions of this paper

Date Written: January 2002 3,

Abstract

Based on measurements with 332 owner-managers, the global shape of the utility function (i.e., S-shaped versus concave or convex over the total range of outcomes) appears to discriminate organizational behavior. Whereas the degree of risk aversion, based on the local shape of the utility function, may be important in explaining owner-manager's trading behavior, the global shape of the utility function appears to drive more structural organizational behavior.

Keywords: organizational behavior, risk aversion, prospect theory, utility theory

JEL Classification: M, M31, C44, L29

Suggested Citation: Suggested Citation

Pennings, Joost M. E. and Smidts, Ale, The Shape of Utility Functions and Organizational Behavior (January 2002 3,). Available at SSRN: https://ssrn.com/abstract=370967