 Risk aversion for variational and multiple-prior preferencesJournal of Mathematical Economics, 2011, vol. 47, issue 3, 382-390 Abstract: The objective of this paper is to identify variational preferences and multiple-prior (maxmin) expected utility functions that exhibit aversion to risk under some probability measure from among the priors. Risk aversion has profound implications on agents’ choices and on market prices and allocations. Our approach to risk aversion relies on the theory of mean-independent risk of Werner (2009). We identify necessary and sufficient conditions for risk aversion of convex variational preferences and concave multiple-prior expected utilities. The conditions are stability of the cost function and of the set of probability priors, respectively, with respect to a probability measure. The two stability properties are new concepts. We show that cost functions defined by the relative entropy distance or other divergence distances have that property. Set of priors defined as cores of convex distortions of probability measures or neighborhoods in divergence distances have that property, too. Keywords: Risk aversion; Mean-independent risk; Multiple-prior expected utility; Variational preferences (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:47:y:2011:i:3:p:382-390 DOI: 10.1016/j.jmateco.2010.08.020 Access Statistics for this article Journal of Mathematical Economics is currently edited by Atsushi (A.) Kajii More articles in Journal of Mathematical Economics from Elsevier |
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