The structure of variational preferences

Simone Cerreia-Vioglio, F. Maccheroni, Massimo Marinacci and A. Rustichini

Journal of Mathematical Economics, 2015, vol. 57, issue C, 12-19

Abstract: Maccheroni, Marinacci, and Rustichini (2006), in an Anscombe–Aumann framework, axiomatically characterize preferences that are represented by the variational utility functional V(f)=minp∈Δ{∫u(f)dp+c(p)}∀f∈F, where u is a utility function on outcomes and c is an index of uncertainty aversion. In this paper, for a given variational preference, we study the class C of functions c that represent V. Inter alia, we show that this set is fully characterized by a minimal and a maximal element, c⋆ and d⋆. The function c⋆, also identified by Maccheroni, Marinacci, and Rustichini (2006), fully characterizes the decision maker’s attitude toward uncertainty, while the novel function d⋆ characterizes the uncertainty perceived by the decision maker.

Keywords: Variational preferences; Ambiguity aversion; Model uncertainty; Revealed unambiguous preference; Clarke derivatives (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: The Structure of Variational Preferences (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:57:y:2015:i:c:p:12-19

DOI: 10.1016/j.jmateco.2015.01.002

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