Expectation and Variation in Multi-period Decisions
This paper suggests an alternative to the weighted average utility maximization as a criterion for multiperiod decisions. A weakened version of Savage's sure-thing principle, imposed on Schmeidler's nonadditive measure model, yields decision rules which involve a weighted average of utility, as well as a weighted average of the utility's variation between each two consecutive periods. The analysis allows for definition and characterization of variation aversion, liking, and neutrality. Copyright 1989 by The Econometric Society.
Volume (Year): 57 (1989)
Issue (Month): 5 (September)
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