EconPapers    
Economics at your fingertips  
 

More pessimism than greediness: a characterization of monotone risk aversion in the Rank-Dependent Expected Utility model

Alain Chateauneuf (), Michèle Cohen () and Isaac Meilijson ()
Additional contact information
Isaac Meilijson: School of Mathematical Sciences [Tel Aviv] - Raymond and Beverly Sackler Faculty of Exact Sciences - Tel Aviv University [Tel Aviv]

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This paper studies monotone risk aversion, the aversion to monotone, meanpreserving increase in risk (Quiggin [21]), in the Rank Dependent Expected Utility (RDEU) model. This model replaces expected utility by another functional, characterized by twofunctions, a utility function u in conjunction with a probability-perception function f.Monotone mean-preserving increases in risk are closely related to the notion of comparative dispersion introduced by Bickel & Lehmann [3, 4] in Non-parametric Statistics. We present a characterization of the pairs (u; f) of monotone risk averse decision makers, based on an index of greediness Gu of the utility function u and an index of pessimism Pf of the probability perception function f: the decision maker is monotone risk averse if and onlyif Pf exceeds Gu. A novel element is that concavity of u is not necessary. In fact, u must be concave only if Pf = 1.

Keywords: Risk aversion; pessimism; greediness; Rank-dependent Expected Utility (search for similar items in EconPapers)
Date: 2005
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00211906
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36) Track citations by RSS feed

Published in Economic Theory, Springer Verlag, 2005, 25, pp.649-667. ⟨10.1007/s00199-003-0451-7⟩

Downloads: (external link)
https://halshs.archives-ouvertes.fr/halshs-00211906/document (application/pdf)

Related works:
Journal Article: More pessimism than greediness: a characterization of monotone risk aversion in the rank-dependent expected utility model (2005) Downloads
Working Paper: More Pessimism than Greediness: A Characterization of Monotone Risk Aversion in the Rank-Dependant Expected Utility Model (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00211906

Access Statistics for this paper

More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2019-11-06
Handle: RePEc:hal:cesptp:halshs-00211906