Random dual expected utility

Wei Ma ()
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Wei Ma: Shandong University

Economic Theory, 2023, vol. 75, issue 2, No 1, 293-315

Abstract: Abstract This paper studies an individual’s random choice behavior when the objects of choice are random variables from a continuum of states of nature to a continuum of consequences. A decision problem is a nonempty finite set of random variables. A random choice rule specifies the choice distribution for each decision problem. We assume that each time an individual makes a choice from a decision problem, she conforms to dual expected utility theory. Since this theory is characterized by a probability distortion on the unit interval, the randomness in the individual’s choice behavior is due to the variation in her distortion. We first provide an axiomatic characterization for this random dual expected utility model, and then characterize comparative risk aversion within this model.

Keywords: Dual expected utility; Random utility; Stochastic choice; Risk aversion (search for similar items in EconPapers)
JEL-codes: D01 D11 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s00199-021-01401-5

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