Local Utility and Multivariate Risk Aversion

Arthur Charpentier, Alfred Galichon and Marc Henry

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Abstract: We revisit Machina's local utility as a tool to analyze attitudes to multivariate risks. We show that for non-expected utility maximizers choosing between multivariate prospects, aversion to multivariate mean preserving increases in risk is equivalent to the concavity of the local utility functions, thereby generalizing Machina's result in Machina (1982). To analyze comparative risk attitudes within the multivariate extension of rank dependent expected utility of Galichon and Henry (2011), we extend Quiggin's monotone mean and utility preserving increases in risk and show that the useful characterization given in Landsberger and Meilijson (1994) still holds in the multivariate case.

Date: 2021-02, Revised 2021-02
New Economics Papers: this item is included in nep-upt
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Published in Mathematics of Operations Research 41-2 (2016) pp. 377-744

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http://arxiv.org/pdf/2102.06075 Latest version (application/pdf)

Related works:
Working Paper: Local Utility and Multivariate Risk Aversion (2012)
Working Paper: Local Utility and Multivariate Risk Aversion (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2102.06075

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