The Dual Theory of Choice under Risk

Menahem E Yaari

Econometrica, 1987, vol. 55, issue 1, 95-115

Abstract: This paper investigates the consequences of the following modification of Expected Utility theory: instead of requiring independence with respect to probability mixtures of risky prospects, require independence with respect to direct mixing of payments o f risky prospects. A new theory of choice under risk- a so-called Dual theory-is obtained. Within this new theory, the following questions are considered: (1) numerical representation of preferences; (2) properties of the utility function; ( 3) the possibility for resolving the "paradoxes" of Expected Utilit y theory; ( 4) the characterization of risk aversion; and (5) comparative statics. The paper ends with a discussion of other non-Expected Utility theories proposed recently. Copyright 1987 by The Econometric Society.

Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (1104)

Downloads: (external link)
http://links.jstor.org/sici?sici=0012-9682%2819870 ... O%3B2-I&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecm:emetrp:v:55:y:1987:i:1:p:95-115

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().