Scalarization Methods and Expected Multi-Utility Representations
AbstractI characterize the class of (possibly incomplete) preference relations over lotteries which can be represented by a compact set of (continuous) expected utility functions that preserve both indifferences and strict preferences. This finding contrasts with the representation theorem of Dubra, Maccheroni and Ok (2004) which typically delivers some functions which do not respect strict preferences. For a preference relation of the sort that I consider in this paper, my representation theorem reduces the problem of recovering the associated choice correspondence over convex sets of lotteries to a scalar-valued, parametric optimization exercise. By utilizing this scalarization method, I also provide characterizations of some solution concepts. Most notably, I show that in an otherwise standard game with incomplete preferences, the collection of pure strategy equilibria that one can find using this scalarization method corresponds to a refinement of the notion of Nash equilibrium that requires the (deterministic) action of each player be undominated by any mixed strategy that she can follow, given others’ actions.
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Bibliographic InfoPaper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0174.
Length: 42 pages
Date of creation: Jul 2012
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Incomplete preference relations; Expected Utility; Nash Equilibrium; Nonbinary Choice; Social Planning; Incomplete Knowledge;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- 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
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-03 (All new papers)
- NEP-MIC-2012-09-03 (Microeconomics)
- NEP-UPT-2012-09-03 (Utility Models & Prospect Theory)
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