Diversification, Convex Preferences and Non-Empty Core
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. This property is shown to be equivalent to the notion of comonotone diversification\,; notion that we introduce in the paper. Finally, in the expected utility model, all these notions of diversification are equivalent and are represented by the concavity of the utility index.
|Date of creation:||01 Aug 2000|
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- Alain Chateauneuf & Rose Anne Dana & Jean-Marc Tallon, 2000.
"Optimal risk-sharing rules and equilibria with Choquet-expected-utility,"
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers)
- Chateauneuf, Alain & Dana, Rose-Anne & Tallon, Jean-Marc, 2000. "Optimal risk-sharing rules and equilibria with Choquet-expected-utility," Journal of Mathematical Economics, Elsevier, vol. 34(2), pages 191-214, October.
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- David Schmeidler, 1989.
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Levine's Working Paper Archive
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