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Stochastic dominance representation of optimistic belief: Theory and applications

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  • Osaki, Yusuke
  • Quiggin, John

Abstract

This note gives a stochastic dominance representation of more optimistic belief in rank dependent expected utility. Applying this observation, we can demonstrate the effect of more optimistic belief on economic decisions and equilibria under risk making comparative static analysis.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4TJ1HG6-1/2/87f9b7d0de8348ffecc94eab1dc1b327
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 101 (2008)
Issue (Month): 3 (December)
Pages: 275-278

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Handle: RePEc:eee:ecolet:v:101:y:2008:i:3:p:275-278

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Comparative statics Optimistic belief Rank dependent expected utility Stochastic dominance;

References

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  1. Han Bleichrodt & Louis Eeckhoudt, 2005. "Saving under rank-dependent utility," Economic Theory, Springer, vol. 25(2), pages 505-511, 02.
  2. Ryan, Matthew J., 2006. "Risk aversion in RDEU," Journal of Mathematical Economics, Elsevier, vol. 42(6), pages 675-697, September.
  3. Athey, Susan, 2002. "Monotone Comparative Statics Under Uncertainty," Scholarly Articles 3372263, Harvard University Department of Economics.
  4. John Quiggin & Robert Chambers, 2007. "Supermodularity and the Comparative Statics of Risk," Theory and Decision, Springer, vol. 62(2), pages 97-117, March.
  5. Quiggin, John, 1991. " Comparative Statics for Rank-Dependent Expected Utility Theory," Journal of Risk and Uncertainty, Springer, vol. 4(4), pages 339-50, December.
  6. Yusuke Osaki, 2005. "Dependent Background Risks and Asset Prices," Discussion Papers in Economics and Business 05-13, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  7. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  8. Masamitsu Ohnishi & Yusuke Osaki, 2006. "Comparative Risk Aversion under Background Risks Revisited," Discussion Papers in Economics and Business 06-16, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  9. Schlee, Edward E, 1994. "The Preservation of Multivariate Comparative Statics in Nonexpected Utility Theory," Journal of Risk and Uncertainty, Springer, vol. 9(3), pages 257-72, December.
  10. Ohnishi, Masamitsu & Osaki, Yusuke, 2006. "The comparative statics on asset prices based on bull and bear market measure," European Journal of Operational Research, Elsevier, vol. 168(2), pages 291-300, January.
  11. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  12. Ormiston Michael B. & Schlee Edward E., 1993. "Comparative Statics under Uncertainty for a Class of Economic Agents," Journal of Economic Theory, Elsevier, vol. 61(2), pages 412-422, December.
  13. Susan Athey, 2002. "Monotone Comparative Statics Under Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 187-223, February.
  14. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
  15. repec:ebl:ecbull:v:4:y:2005:i:8:p:1-8 is not listed on IDEAS
  16. Hong, Chew Soo & Karni, Edi & Safra, Zvi, 1987. "Risk aversion in the theory of expected utility with rank dependent probabilities," Journal of Economic Theory, Elsevier, vol. 42(2), pages 370-381, August.
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