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Second-order approximation

Approximation of an arbitrary function by its assuming that the terms of the higher order are negligible. It is used, for example, assuming that the terms of the higher order are negligible. It is used, for example, in models of individual choice under uncertainty to capture risk aversion, or in welfare models to capture the effect of income distribution. See also linear approximation.

Reference: Oxford Press Dictonary of Economics, 5th edt.