Labs
Utility - Center for International Economic Studies
% Power
utility function u(c)=c^(1-gamma)/(1-gamma) if gamma ~= 1;
% u(c)=ln(c) if gamma=1.
% Utility
is only defined if c>=0 for gamma<1 and c>0 if gamma>1
% The risk
aversion coefficient is pass on to the function by
% define it as a global variable.
% Also see
invpoweru.m
function u=poweru(c)
global
gamma;
[m,n]=size(c);
u=zeros(m,n);
if
(gamma<0)
u=-inf*abs(c);
% display('invalid relative risk aversion coefficient');
else
for i=1:m
for j=1:n
if (gamma<1 & c(i,j) >= 0) | (gamma>1 & c(i,j)>0)
u(i,j)=c(i,j)^(1-gamma)/(1-gamma);
else if (gamma==1 & c(i,j)>0)
u(i,j)=log(c(i,j));
else
u(i,j)=-inf;
% display('consumption must be nonnegative if RRA coefficient is
less than 1 and positive if greater than and equal to 1')
end
end
end
end
end
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