Dual theory of choice with multivariate risks

Alfred Galichon and Marc Henry

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Abstract: We propose a multivariate extension of Yaari's 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.

Date: 2021-02, Revised 2021-02
New Economics Papers: this item is included in nep-cwa, nep-ore, nep-rmg and nep-upt
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Published in Journal of Economic Theory 147-4 (2012) pp. 1501-1516

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Journal Article: Dual theory of choice with multivariate risks (2012)
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