Dual theory of choice with multivariate risks

DOI10.1016/J.JET.2011.06.002zbMATH Open1260.91058arXiv2102.02578OpenAlexW3022771448MaRDI QIDQ435913FDOQ435913

Marc Henry, Alfred Galichon

Publication date: 13 July 2012

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

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.

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

Recommendations

• The Dual Theory of Choice under Risk
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zbMATH Keywords

local utility functionmultidimensional prospectsmultivariate comonotomicityYaare dual theory

Mathematics Subject Classification ID

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

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Cited In (15)

• Multivariate comonotonicity
• Yaari's dual theory without the completeness axiom
• Title not available (Why is that?)
• Correlated risks, bivariate utility and optimal choices
• Introduction to inequality and risk
• Pareto efficiency for the concave order and multivariate comonotonicity
• Extreme dependence for multivariate data
• Dynamic conic hedging for competitiveness
• Local utility and multivariate risk aversion
• Monge-Kantorovich superquantiles and expected shortfalls with applications to multivariate risk measurements
• Multidimensional inequalities and generalized quantile functions
• The Dual Theory of Choice under Risk
• Is there a plausible theory for decision under risk? A dual calibration critique
• Vector copulas
• Vector quantile regression beyond the specified case

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