The Shape of Utility Functions and Organizational Behavior
21 Pages Posted: 20 Feb 2003
Date Written: January 2002 3,
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