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Benchmarking real-valued acts

Author

Listed:
  • Erio Castagnoli

    (Bocconii University, Milan, Italy)

  • Marco LiCalzi

    (University of Venice, Italy)

Abstract

A benchmarking procedure ranks real-valued acts by the probability that they outperform a benchmark B; that is, an act f is evaluated by means of the functional V(f) = P(f > B). Expected utility is a special case of benchmarking procedure, where the acts and the benchmark are stochastically independent. This paper provides axiomatic characterizations of preference relations that are representable as benchmarking procedures. The key axiom is the sure-thing principle. When the state space is infinite, different continuity assumptions translate into different properties of the probability P.

Suggested Citation

  • Erio Castagnoli & Marco LiCalzi, 2005. "Benchmarking real-valued acts," Microeconomics 0502001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpmi:0502001
    Note: Type of Document - pdf; pages: 22
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    References listed on IDEAS

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    1. Wakker, Peter, 1993. "Counterexamples to Segal's Measure Representation Theorem," Journal of Risk and Uncertainty, Springer, vol. 6(1), pages 91-98, January.
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    6. Erio Castagnoli & Marco LiCalzi, 2005. "Expected utility without utility," Game Theory and Information 0508004, University Library of Munich, Germany.
    7. Robert Bordley & Marco LiCalzi, 2000. "Decision analysis using targets instead of utility functions," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 23(1), pages 53-74.
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    Cited by:

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    3. Edoardo Berton & Alessandro Doldi & Marco Maggis, 2024. "On continuity of state-dependent utilities," Papers 2401.09054, arXiv.org.
    4. Stanca, Lorenzo, 2020. "A simplified approach to subjective expected utility," Journal of Mathematical Economics, Elsevier, vol. 87(C), pages 151-160.
    5. David B. Brown & Enrico De Giorgi & Melvyn Sim, 2012. "Aspirational Preferences and Their Representation by Risk Measures," Management Science, INFORMS, vol. 58(11), pages 2095-2113, November.
    6. Athanasoglou, Stergios & Bosetti, Valentina & Drouet, Laurent, 2017. "A Simple Framework for Climate-Change Policy under Model Uncertainty," MITP: Mitigation, Innovation and Transformation Pathways 254043, Fondazione Eni Enrico Mattei (FEEM).
    7. Marco Maggis & Andrea Maran, 2018. "Stochastic Dynamic Utilities and Inter-Temporal Preferences," Papers 1803.05244, arXiv.org, revised Feb 2020.
    8. Enrico G. De Giorgi & David B. Brown & Melvyn Sim, 2010. "Dual representation of choice and aspirational preferences," University of St. Gallen Department of Economics working paper series 2010 2010-07, Department of Economics, University of St. Gallen.

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    More about this item

    Keywords

    sure-thing principle; state-dependent expected utility; measure representation approach; target-based reasoning;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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