Local Utility and Multivariate Risk Aversion

Arthur Charpentier, Alfred Galichon and Marc Henry

CIRANO Working Papers from CIRANO

Abstract: We revisit Machina's local utility as a tool to analyze attitudes to multivariate risks. Using martingale embedding techniques, 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 [18]. To analyze comparative risk attitudes within the multivariate extension of rank dependent expected utility of [10], we extend Quiggin's monotone mean and utility preserving increases in risk and show that the useful characterization given in [17] still holds in the multivariate case.

Keywords: local utility; multivariate risk aversion; multivariate rank dependent utility; pessimism; multivariate Bickel-Lehmann dispersion (search for similar items in EconPapers)
Date: 2012-06-01
New Economics Papers: this item is included in nep-mic and nep-upt
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https://cirano.qc.ca/files/publications/2012s-17.pdf

Related works:
Working Paper: Local Utility and Multivariate Risk Aversion (2021)
Working Paper: Local Utility and Multivariate Risk Aversion (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2012s-17

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