Local utility and multivariate risk aversion

DOI10.1287/MOOR.2015.0736zbMATH Open1382.91042arXiv2102.06075OpenAlexW3126560425MaRDI QIDQ2806814FDOQ2806814

Authors: Arthur Charpentier, Alfred Galichon, Marc Henry 

Publication date: 19 May 2016

Published in: Mathematics of Operations Research (Search for Journal in Brave)

Abstract: We revisit Machina's local utility as a tool to analyze attitudes to multivariate risks. We show that for non-expected utility maximizers choosing between multivariate prospects, aversion to multivariate mean preserving increases in risk is equivalent to the concavity of the local utility functions, thereby generalizing Machina's result in Machina (1982). To analyze comparative risk attitudes within the multivariate extension of rank dependent expected utility of Galichon and Henry (2011), we extend Quiggin's monotone mean and utility preserving increases in risk and show that the useful characterization given in Landsberger and Meilijson (1994) still holds in the multivariate case.

Full work available at URL: https://arxiv.org/abs/2102.06075

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zbMATH Keywords

multivariate risk aversionpessimismlocal utilitymultivariate Bickel-Lehmann dispersionmultivariate rank dependent utility

Mathematics Subject Classification ID

Utility theory (91B16)

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Cited In (6)

• Generalized Expected Utility Analysis of Multivariate Risk Aversion
• Multivariate stochastic dominance for risk averters and risk seekers
• Local utility functions
• Fear of loss, inframodularity, and transfers
• Title not available (Why is that?)
• A strong (Ross) characterization of multivariate risk aversion

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