**Definition:**The Arrow-Pratt measure is an attribute of a utility function.

Denote a utility function by u(c). The Arrow-Pratt measure of absolute risk
aversion is defined by:

R_{A}=-u''(c)/u'(c)

This is a measure of the curvature of the utility function. This measure is invariant to affine transformation of the utility function, which is a useful attributed because such transformation do not affect the preferences expressed by u().

If R_{A}() is decreasing in c, then u() displays *decreasing
absolute risk aversion*. If R_{A}() is increasing in c, then u()
displays *increasing absolute risk aversion*. If R_{A}() is
constant with respect to changes in c, then u() displays *constant absolute
risk aversion*.(Econterms)

**Terms related to Arrow-Pratt Measure:***None*

**About.Com Resources on Arrow-Pratt Measure:***None*

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**Books on Arrow-Pratt Measure:**

- Huang, Chi-fu, and Robert H. Litzenberger. 1988.
*Foundations of Financial Economics.*Prentice-Hall, Inc.

**Journal Articles on Arrow-Pratt Measure:**

*None*