Dual theory of choice with multivariate risks

Alfred Galichon and Marc Henry

Journal of Economic Theory, 2012, vol. 147, issue 4, 1501-1516

Abstract: We propose a multivariate extension of Yaariʼs dual theory of choice under risk. We show that a decision maker with a preference relation on multidimensional prospects that preserves first order stochastic dominance and satisfies comonotonic independence behaves as if evaluating prospects using a weighted sum of quantiles. Both the notions of quantiles and of comonotonicity are extended to the multivariate framework using optimal transportation maps. Finally, risk averse decision makers are characterized within this framework and their local utility functions are derived. Applications to the measurement of multi-attribute inequality are also discussed.

Keywords: Risk; Rank dependent utility theory; Multivariate comonotonicity; Optimal transportation; Multi-attribute inequality; Gini evaluation functions (search for similar items in EconPapers)
JEL-codes: C61 D63 D81 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (24)

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Working Paper: Dual theory of choice with multivariate risks (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:147:y:2012:i:4:p:1501-1516

DOI: 10.1016/j.jet.2011.06.002

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