Definitions

isoelastic

Isoelastic utility

In economics, the isoelastic function for utility, sometimes isoelastic utility function, is used to express utility in terms of consumption.

It is

u(c) = frac{c^{1-eta}}{1-eta}

where c is consumption, u(c) the associated utility, and eta a constant (if eta=1 it is conventional to use the limiting value, viz u(c)=log c). Stern states that the value of eta "is essentially a value judgement".

The isoelastic function is used in the Stern review, page 52.

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