Axiomatic Foundations of Multiplier Preferences
This paper axiomatizes the robust control criterion of multiplier preferences introduced by Hansen and Sargent (2001). The axiomatization relates multiplier preferences to other classes of preferences studied in decision theory, in particular, the variational preferences recently introduced by Maccheroni, Marinacci, and Rustichini (2006a). This paper also establishes a link between the parameters of the multiplier criterion and the observable behavior of the agent. This link enables measurement of the parameter on the basis of observable choice data and provides a useful tool for applications.
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