Abstract
This article investigates the preservation of multivariate expected utility comparative statics for "smooth" nonexpected utility representations. Specifically, we answer the following question: if an expected utility comparative statics property depends only on preferences over sure prospects, then when will a nonexpected utility maximizer with identical sure preferences also satisfy that property? We demonstrate that the effects of increased risk aversion are preserved under the "Almost Degenerate Independence" axiom, but that those of distribution changes of exogenous risks are not preserved under stringent assumptions. Hence, nonexpected utility comparative statics may diverge from expected utility, even for "first-order" properties-those whose effect is determinable from restrictions on "local" utility functions.
Original language | English (US) |
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Pages (from-to) | 257-272 |
Number of pages | 16 |
Journal | Journal of Risk and Uncertainty |
Volume | 9 |
Issue number | 3 |
DOIs | |
State | Published - Dec 1994 |
Keywords
- D81
- comparative statics
- expected utility
- multivariate risk
- nonexpected utility
- risk aversion
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics