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Ordinal dominance and risk aversion

Author

Listed:
  • Bulat Gafarov

    (The Pennsylvania State University
    National Research University Higher School of Economics)

  • Bruno Salcedo

    (The Pennsylvania State University)

Abstract

We find that, for sufficiently risk-averse agents, strict dominance by pure or mixed actions coincides with dominance by pure actions in the sense of (Börgers in Econometrica 61(2):423–430, 1993), which, in turn, coincides with the classical notion of strict dominance by pure actions when preferences are asymmetric. Since risk aversion is a cardinal feature, all finite single-agent choice problems with ordinal preferences admit compatible utility functions which are sufficiently risk averse as to achieve equivalence between pure and mixed dominance. This result extends to some infinite environments.

Suggested Citation

  • Bulat Gafarov & Bruno Salcedo, 2015. "Ordinal dominance and risk aversion," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 287-298, October.
    • Handle: RePEc:spr:etbull:v:3:y:2015:i:2:d:10.1007_s40505-014-0059-z
    DOI: 10.1007/s40505-014-0059-z
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    References listed on IDEAS

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    More about this item

    Keywords

    Rationalizability; Dominance; Risk aversion; Ordinal preferences; Revealed preferences;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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