Diversification, Convex Preferences and Non-Empty Core

Alain Chateauneuf and Jean-Marc Tallon ()
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Alain Chateauneuf: CERMSEM

No 751, Econometric Society World Congress 2000 Contributed Papers from Econometric Society

Abstract: 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: 2000-08-01
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Working Paper: Diversification, Convex Preferences and Non-Empty Core (1998)
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