An explicit representation for disappointment aversion and other betweenness preferences

Simone Cerreia-Vioglio, David Dillenberger () and Pietro Ortoleva ()
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David Dillenberger: Department of Economics, University of Pennsylvania
Pietro Ortoleva: Department of Economics, Princeton University

Theoretical Economics, 2020, vol. 15, issue 4

Abstract: One of the most well-known models of non-expected utility is Gul (1991)'s model of Disappointment Aversion. This model, however, is defined implicitly, as the solution to a functional equation; its explicit utility representation is unknown, which may limit its applicability. We show that an explicit representation can be easily constructed, using solely the components of the implicit one. We also provide a more general result: an explicit representation for preferences in the Betweenness class that also satisfy Negative Certainty Independence (Dillenberger, 2010) or its counterpart. We show how our approach gives a simple way to behaviorally identify the parameters of the representation and to study the consequences of disappointment aversion in a variety of applications.

Keywords: Disappointment Aversion; Betweenness; Cautious Expected Utility; utility representation (search for similar items in EconPapers)
JEL-codes: D80 D81 (search for similar items in EconPapers)
Date: 2020-11-19
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: An Explicit Representation for Disappointment Aversion and Other Betweenness Preferences (2018)
Working Paper: An Explicit Representation for Disappointment Aversion and Other Betweenness Preferences (2018)
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