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Supermodular correspondences and comparison of multi-prior beliefs

Pawel Dziewulski () and John Quah ()

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: Economic decisions often involve maximising an objective whose value is itself the outcome of another optimisation problem. This decision structure arises in multi-output production and choice under uncertainty with multi-prior beliefs. To analyse comparative statics in these models, we introduce a theory of Supermodular correspondences. In particular, we employ this theory to generalise the notion of first order stochastic dominance to multi-prior beliefs, allowing us to characterise conditions under which greater optimism leads to higher action.

Keywords: monotone comparative statics; supermodularity; correspondences; stochastic dominance; multi-output production; ambiguity; dynamic programming (search for similar items in EconPapers)
JEL-codes: C61 D21 D24 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-mic and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:sus:susewp:0619

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