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Dual Approaches To The Analysis Of Risk Aversion

  • Chambers, Robert G.
  • Quiggin, John C.

Dual approaches have proved their value in many areas of economic analysis. Until recently, however, they have been virtually ignored in the analysis of choice under uncertainty.In this paper, we present a dual formulation of choice under uncertainty based on a few simple assumptions about preferences, namely, continuity, monotonicity and convexity of preference sets. Particular emphasis is given to showing that the additive separability restriction, key to expected-utility theory, on preferences can be dropped with little loss of analytic power for a broad class of choice problems.

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Paper provided by University of Maryland, Department of Agricultural and Resource Economics in its series Working Papers with number 28606.

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Date of creation: 2002
Date of revision:
Handle: RePEc:ags:umdrwp:28606
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  1. Epstein, Larry G. & Zin, Stanley E., 1990. "'First-order' risk aversion and the equity premium puzzle," Journal of Monetary Economics, Elsevier, vol. 26(3), pages 387-407, December.
  2. Quiggin, John & Chambers, Robert G, 1998. "Risk Premiums and Benefit Measures for Generalized-Expected-Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 17(2), pages 121-37, November.
  3. Segal, Uzi & Spivak, Avia, 1990. "First order versus second order risk aversion," Journal of Economic Theory, Elsevier, vol. 51(1), pages 111-125, June.
  4. Thibault Gajdos & Jean-Marc Tallon & Jean-Christophe Vergnaud, 2002. "Decision Making with Imprecise Probabilistic Information," ICER Working Papers - Applied Mathematics Series 18-2003, ICER - International Centre for Economic Research, revised May 2003.
  5. Milgrom, Paul, 1994. "Comparing Optima: Do Simplifying Assumptions Affect Conclusions?," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 607-15, June.
  6. Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, vol. 59(3), pages 711-30, May.
  7. Machina, Mark J, 2001. " Payoff Kinks in Preferences over Lotteries," Journal of Risk and Uncertainty, Springer, vol. 23(3), pages 207-60, November.
  8. Lwebel Arthur & Perraudin William, 1995. "A Theorem on Portfolio Separation with General Preferences," Journal of Economic Theory, Elsevier, vol. 65(2), pages 624-626, April.
  9. Brennan, M. J. & Kraus, A., 1976. "The Geometry of Separation and Myopia," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 11(02), pages 171-193, June.
  10. Cass, David & Stiglitz, Joseph E., 1970. "The structure of investor preferences and asset returns, and separability in portfolio allocation: A contribution to the pure theory of mutual funds," Journal of Economic Theory, Elsevier, vol. 2(2), pages 122-160, June.
  11. Feder, Gershon, 1977. "The impact of uncertainty in a class of objective functions," Journal of Economic Theory, Elsevier, vol. 16(2), pages 504-512, December.
  12. Robert G. Chambers & Rolf Färe, 1998. "Translation homotheticity," Economic Theory, Springer, vol. 11(3), pages 629-641.
  13. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
  14. Safra, Zvi & Segal, Uzi, 1998. "Constant Risk Aversion," Journal of Economic Theory, Elsevier, vol. 83(1), pages 19-42, November.
  15. Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
  16. Blackorby, Charles & Donaldson, David, 1980. "A Theoretical Treatment of Indices of Absolute Inequality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 107-36, February.
  17. Milne, Frank, 1979. "Consumer Preferences, Linear Demand Functions and Aggregation in Competitive Asset Markets," Review of Economic Studies, Wiley Blackwell, vol. 46(3), pages 407-17, July.
  18. Luenberger, David G., 1992. "Benefit functions and duality," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 461-481.
  19. Peleg, Bezalel, 1975. "Efficient random variables," Journal of Mathematical Economics, Elsevier, vol. 2(2), pages 243-252.
  20. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
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