Fear of loss, inframodularity, and transfers
AbstractThere exist several characterizations of concavity for univariate functions. One of them states that a function is concave if and only if it has nonincreasing differences. This definition provides a natural generalization of concavity for multivariate functions called inframodularity. Inframodular transfers are defined and it is shown that a finite lottery is preferred to another by all expected utility maximizers with an inframodular utility if and only if the first lottery can be obtained from the second via a sequence of inframodular transfers. This result is a natural multivariate generalization of Rothschild and Stiglitzʼs construction based on mean preserving spreads.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 147 (2012)
Issue (Month): 4 ()
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Web page: http://www.elsevier.com/locate/inca/622869
Mean preserving spread; Integral stochastic orders; Risk aversion; Ultramodularity; Dual cones;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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