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Comparative statics in an ordinal theory of choice under risk

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  • Chiu, W. Henry

Abstract

This paper considers the effects of changes in risk on optimal decisions under risk in an analytical framework that is capable of replicating and extending important results obtained in the EU framework and is yet far more descriptive and no less tractable at the same time. We show that a version of the general framework can be used to establish in the class of problems considered by Rothschild and Stiglitz (1971) and Machina (1989) the equivalence between behavioral assumptions and the characteristics of the utility function, which are in turn necessary and sufficient for comparative statics results.

Suggested Citation

  • Chiu, W. Henry, 2019. "Comparative statics in an ordinal theory of choice under risk," Mathematical Social Sciences, Elsevier, vol. 101(C), pages 113-123.
    • Handle: RePEc:eee:matsoc:v:101:y:2019:i:c:p:113-123
    DOI: 10.1016/j.mathsocsci.2019.07.004
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