Fear of loss, inframodularity, and transfers

Alfred Müller and Marco Scarsini

Journal of Economic Theory, 2012, vol. 147, issue 4, 1490-1500

Abstract: There exist several characterizations of concavity for univariate functions. One of them states that a function is concave if and only if it has nonincreasing differences. This definition provides a natural generalization of concavity for multivariate functions called inframodularity. Inframodular transfers are defined and it is shown that a finite lottery is preferred to another by all expected utility maximizers with an inframodular utility if and only if the first lottery can be obtained from the second via a sequence of inframodular transfers. This result is a natural multivariate generalization of Rothschild and Stiglitzʼs construction based on mean preserving spreads.

Keywords: Mean preserving spread; Integral stochastic orders; Risk aversion; Ultramodularity; Dual cones (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:147:y:2012:i:4:p:1490-1500

DOI: 10.1016/j.jet.2011.02.002

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