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Maxmin under risk

Listed author(s):
  • Fabio Maccheroni


    (Istituto di Metodi Quantitativi, Università Bocconi, viale Isonzo 25, 20135 Milano, ITALY)

Let $\succsim $ be a continuous and convex weak order on the set of lotteries defined over a set Z of outcomes. Necessary and sufficient conditions are given to guarantee the existence of a set $\mathcal{U}$ of utility functions defined on Z such that, for any lotteries p and q, \[ p\succsim q \Leftrightarrow \min_{u\in{\mathcal U}}{\Bbb E} _p\left[ u\right] \geq \min_{u\in{\mathcal U}}{\Bbb E} _q\left[ u\right] . \] The interpretation is simple: a conservative decision maker has an unclear evaluation of the different outcomes when facing lotteries. She then acts as if she were considering many expected utility evaluations and taking the worst one.

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Article provided by Springer & Society for the Advancement of Economic Theory (SAET) in its journal Economic Theory.

Volume (Year): 19 (2002)
Issue (Month): 4 ()
Pages: 823-831

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Handle: RePEc:spr:joecth:v:19:y:2002:i:4:p:823-831
Note: Received: January 19, 2000; revised version: December 20, 2000
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