Social Exclusion, Ambiguity and (IR)rationality

Annette Krauss () and Donald J. Brown ()
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Annette Krauss: Dept. of Banking and Finace, University of Zurich
Donald J. Brown: Dept. of Economics, Yale University, https://economics.yale.edu/people/emeritus/donald-j-brown

No 2202R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This working paper extends the methodology of non-smooth affective portfolio theory (APT) for eliciting (IR)rational preferences of investors endowed with continuous quasilinear utility functions, where assets are portfolios of risky and ambiguous state-contingent claims. The elicitation is a solution of the affective Afriat inequalities;see technical appendix 1. Solving the smooth affective Afriat inequalities is Np-hard; see technical appendices 2, 3, and 4. The proposed extension is a methodology for the elicitation of (IR)rational preferences of individuals endowed with random continuous quasilinear utility functions defined over finite subsets of discrete social goods as a refutable model of social exclusion in the incomplete markets for social goods; see technical appendices 5 and 6. The methods of elicitation are generalized estimating equations (GEE) and alternating logistic regression (ALR); see technical appendices; 7 and 8.

Keywords: Rationality; Behavioral Finance; Well Being (search for similar items in EconPapers)
JEL-codes: D91 G41 I31 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2019-09, Revised 2019-10
New Economics Papers: this item is included in nep-ore and nep-upt
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