Eliciting Utility for (Non)Expected Utility Preferences Using Invariance Transformations
This paper presents a methodology to determine the preferences of an individual facing risk in the framework of (non)-expected utility theory. When individual preference satisfies a given invariance property, his utility function is solution of a functional equation associated to a specific transformation. Conversely, there exist transformations characterizing any given utility function and its invariance property. More precisely, invariance with respect to two transformations uniquely determines the individual utility function. We provide examples of such transformations for CARA or CRRA utility, but also with any other utility specification and discuss the example of DARA and IRRA specifications.
|Date of creation:||15 Sep 2010|
|Date of revision:|
|Note:||View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00517726/en/|
|Contact details of provider:|| Web page: http://hal.archives-ouvertes.fr/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- André de Palma & Moshe Ben-Akiva & David Brownstone & Charles Holt & Thierry Magnac & Daniel McFadden & Peter Moffatt & Nathalie Picard & Kenneth Train & Peter Wakker & Joan Walker, 2008.
"Risk, Uncertainty and Discrete Choice Models,"
THEMA Working Papers
2008-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- de Palma, André & Prigent, Jean-Luc, 2008. "Utilitarianism and fairness in portfolio positioning," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1648-1660, August.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00517726. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.