The Structure of Variational Preferences

Simone Cerreia-Vioglio, F. Maccheroni, Massimo Marinacci and A. Rustichini

No 520, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: Maccheroni, Marinacci, and Rustichini [17], in an Anscombe-Aumann framework, axiomatically characterize preferences that are represented by the variational utility functional V (f) = min p2 Z u (f) dp + c (p) 8f 2 F; where u is a utility function on outcomes and c is an index of uncertainty aversion. In this paper, for a given variational preference, we study the class C of functions c that represent V . Inter alia, we show that this set is fully characterized by a minimal and a maximal element, c? and d?. The function c?, also identi?ed by Maccheroni, Marinacci, and Rustichini [17], fully characterizes the decision maker's attitude toward uncertainty, while the novel function d? characterizes the uncertainty perceived by the decision maker.

Date: 2014
New Economics Papers: this item is included in nep-mic and nep-upt
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Journal Article: The structure of variational preferences (2015)
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