Stochastic dominance, risk and disappointment: a synthesis
Thierry Chauveau ()
Additional contact information
Thierry Chauveau: CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
In this article, utilities are substituted for monetary values in the definition of second order stochastic dominance (SSD). Doing so yields a family of preorders induced by SSD among which one is the "closest" to the original preorder of preferences. The corresponding utility function is the most likely to be that of the decision maker. It may be defined before behavioural axioms are set. Theories of decision making under risk can then be restated in a more general and consistent way. As an example, a new theory of disappointment is developed, which is endowed with three important properties: (a) risk premia are invariant by translation, (b) when constant marginal utility is assumed, preferences are represented by a functional which is the opposite to a convex measure of risk and (c) the functional representing preferences and the utility function can be easily elicited through experimental testing.
Keywords: disappointment; risk-aversion; expected utility; risk premium; stochastic dominance; subjective risk; déception; aversion pour le risque; risque subjectif; prime de risque; utilité espérée (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic and nep-upt
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01025102v3
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Published in Documents de travail du Centre d'Economie de la Sorbonne 2014.54RR - ISSN : 1955-611X - Version o.. 2016
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-01025102
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 ().