Expected Utility Calculator
Investing & MarketsCalculate the expected utility of an uncertain outcome using a square-root utility function, reflecting risk aversion.
Expected Utility
The probability-weighted sum of each outcomes utility, using a square-root utility function.
Expected Value
$16,000.00
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Odeh Ahwal0people find this calculator helpful
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Frequently Asked Questions
What is expected utility?
Expected utility weights each possible outcomes utility (not just its dollar value) by its probability. It reflects that most people are risk-averse: an extra dollar matters less the more money you already have.
Why use a square root instead of the dollar value directly?
The square root function is concave, meaning it grows more slowly as the input increases. This models diminishing marginal utility of money, a standard assumption in risk-averse decision theory.
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