Dual theory of choice with multivariate risks

DOI10.1016/J.JET.2011.06.002MaRDI QIDQ435913zbMATH OpenOpenAlexFDO

Authors Marc Henry, Alfred Galichon

Publication date 13 July 2012

Published in Journal of Economic Theory (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2102.02578

zbMATH Keywords

local utility functionmultidimensional prospectsmultivariate comonotomicityYaare dual theory

Mathematics Subject Classification ID

Decision theory (91B06) Utility theory (91B16) Stochastic models in economics (91B70)

Abstract: We propose a multivariate extension of Yaari's dual theory of choice under risk. We show that a decision maker with a preference relation on multidimensional prospects that preserves first order stochastic dominance and satisfies comonotonic independence behaves as if evaluating prospects using a weighted sum of quantiles. Both the notions of quantiles and of comonotonicity are extended to the multivariate framework using optimal transportation maps. Finally, risk averse decision makers are characterized within this framework and their local utility functions are derived. Applications to the measurement of multi-attribute inequality are also discussed.

Recommendations

• The Dual Theory of Choice under Risk
• Yaari's dual theory without the completeness axiom
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• Ordering risks: expected utility theory versus Yaari's dual theory of risk
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Cited in

(17)

• Dual utilities on risk aggregation under dependence uncertainty
• Risk apportionment: the dual story
• Multidimensional inequalities and generalized quantile functions
• Extreme dependence for multivariate data
• Monge-Kantorovich superquantiles and expected shortfalls with applications to multivariate risk measurements
• Vector quantile regression beyond the specified case
• Introduction to inequality and risk
• The Dual Theory of Choice under Risk
• Yaari's dual theory without the completeness axiom
• Is there a plausible theory for decision under risk? A dual calibration critique
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• Correlated risks, bivariate utility and optimal choices
• Vector copulas
• Dynamic conic hedging for competitiveness
• Pareto efficiency for the concave order and multivariate comonotonicity
• Multivariate comonotonicity

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