Diversification, convex preferences and non-empty core in the Choquet expected utility model
We show, in the Choquet expected utility model, that preference for diversification, that is, convex preferences, is equivalent to a concave utility index and a convex capacity. We then introduce a weaker notion of diversification, namely "sure diversification." We show that this implies that the core of the capacity is non-empty. The converse holds under concavity of the utility index, which is itself equivalent to the notion of comonotone diversification, that we introduce. In an Anscombe-Aumann setting, preference for diversification is equivalent to convexity of the capacity and preference for sure diversification is equivalent to non-empty core. In the expected utility model, all these notions of diversification are equivalent and are represented by the concavity of the utility index.
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Volume (Year): 19 (2002)
Issue (Month): 3 ()
Pages: 509-523
| Handle: | RePEc:spr:joecth:v:19:y:2002:i:3:p:509-523 |
| Note: | Received: July 27, 1999; revised version: November 7, 2000 |
| Contact details of provider: | Web page: http://link.springer.de/link/service/journals/00199/index.htm
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