Decision Maker-s Risk Attitude Based on Expected Utility-Entropy Measure of Risk

As a measure of decision maker-s perception of risks, the expected utility-entropy measure of risks is expressed as the linear weighted sum of expected utility of risky action and entropy of the state, where expected utility-entropy tradeoff coefficient is the important constant parameter. However, an empirical study in prospect theory shows that the decision maker-s risk attitude is closely related to his wealth level. The paper analyzes the impact of some kinds of decision makers- wealth level to their risk attitude. Then an expression has been established between expected utility-entropy tradeoff coefficient and decision maker-s wealth level via Arrow-Pratt risk aversion to this certain kind of decision makers. On the basis of this expression, several kinds of decision maker-s behaviors can be explained reasonably.