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A Risk-Neutral Consumer and His Coherent Decisions Under Uncertainty: A Methodological Analysis

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  • Pierpaolo Angelini

Abstract

If we study the expected utility function then we deal with a uni?ed approach to an integrated formulation of decision theory in its two subjective components- utility and probability. We decompose the expected utility function inside of an m-dimensional linear space after decomposing a contingent consumption plan viewed as a univariate random quantity. We propose a condition of coherence compatible with all possible attitudes in the face of risk of a consumer. It is a geometric condition of coherence. In particular, we consider a risk-neutral consumer and his coherent decisions under uncertainty. The right closed structure in order to deal with utility and probability is a linear space in which we study coherent decisions under uncertainty having as their goal the maximization of the prevision of the utility associated with a contingent consumption bundle.

Suggested Citation

  • Pierpaolo Angelini, 2020. "A Risk-Neutral Consumer and His Coherent Decisions Under Uncertainty: A Methodological Analysis," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(4), pages 1-95, April.
    • Handle: RePEc:ibn:ijefaa:v:12:y:2020:i:4:p:95
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    References listed on IDEAS

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    1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, Decembrie.
    2. Schoemaker, Paul J H, 1982. "The Expected Utility Model: Its Variants, Purposes, Evidence and Limitations," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 529-563, June.
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    Cited by:

    1. Pierpaolo Angelini & Fabrizio Maturo, 2020. "Non-Parametric Probability Distributions Embedded Inside of a Linear Space Provided with a Quadratic Metric," Mathematics, MDPI, vol. 8(11), pages 1-17, October.

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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