Uncertainty Aversion, Risk Aversion, and the Optimal Choice of Portfolio

Dow, James; Werlang, Sérgio Ribeiro da Costa

doi:10.2307/2951685

Cited by 642 publications

(382 citation statements)

References 9 publications

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“…We have not required that playersí beliefs be independent, since at present there are unresolved questions concerning the deÖnition of independence for capacities, see [17] and [19]. 7 A similar deÖnition has been proposed by Marinacci [30], who built on earlier work by Dow and Werlang [12]. 8 An example of this would be the public goods model with exponential utility.…”

Section: This Implies Ementioning

confidence: 99%

See 1 more Smart Citation

Strategic Complements, Substitutes, and Ambiguity: The Implications for Public Goods

Eichberger¹,

Kelsey²

2002

Journal of Economic Theory

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Section: This Implies Ementioning

confidence: 99%

“…12 Hence it is possible that a small increase in ambiguity could cause a collapse in economic activity. This process may not be reversible.…”

Section: Macroeconomic Coordination Gamesmentioning

confidence: 99%

Strategic Complements, Substitutes, and Ambiguity: The Implications for Public Goods

Eichberger¹,

Kelsey²

2002

Journal of Economic Theory

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“…In particular, if n is finite (that is, Q = { Wi , ... , Wn} ) and f (w1 ) 2 f (w2) 2 · .. 2 f (wn ), then (6) Notice that since the integrands are monotone, the Choquet integral always exists, and if u is a probability it reduces to a standard Lebesgue integral. Henceforth all the integrals will be taken in the sense of Choquet, except where otherwise noted.…”

Section: Propositionmentioning

confidence: 99%

On Independence for Non-Additive Measures, with a Fubini Theorem

Ghirardato

1997

Journal of Economic Theory

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Recent models of decision making represent agents' beliefs by non-additive set-f unctions. An important technical question which arises in applications to diverse aereas of eco nomics is how to define independence of such set-functions. After arguing that the straightforward generalization of independence does not in general yield a unique prod uct, in this work I show that, while Fubini's theorem is in general false if additivity is not granted, it is true when a certain type of function is being integrated. For these functions the iterated integrals coincide with the integral with respect to products which satisfy a certain property, strictly stronger than independence. I show that most of the assumptions made in these results are very close to being necessary. In general the men tioned property is still not strong enough to uniquely define a product. On the other hand I discuss some proposals which have been made in the literature, and I show that u_ nicity can however be obtained when the product is assumed to be a belief function. Moreover I show that the unique product thus obtained has an intuitive justification when the marginals are distributions indu . ced by random correspondences. Finally I use the results in the paper to discuss the question of randomization in decision models with non-additive beliefs.

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“…This suggests a role in some risk allocation contexts for options contracts. However, Dow and Werlang (1992) show that ambiguity can diminish the actual trade in such risk-hedging instruments. And, of course, the focus of this paper is on environmental and resource issues, which are largely characterized by non-market goods.…”

Section: Summary and Some Caveatsmentioning

confidence: 99%

“…Bleichrodt and Pinto (2000) simply state that lower subadditivity, for example, means a lower interval has more impact on a decision maker than an intermediate range of probabilities. 11 The assumption that q(1) = 1 is relaxed by Dow and Werlang (1992) to address the issue of ambiguity. 12 This property is what guarantees that the stochastic dominance is satisfied and is roughly equivalent to Choquet integration that has been axiomatically derived by Schmeidler (1989).…”

Section: The Rdeu Modelmentioning

confidence: 99%

Why environmental and resource economists should care about non-expected utility models

Shaw

Woodward

2008

Resource and Energy Economics

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Experimental and theoretical analysis has shown that the conventional expected utility (EU) and subjective expected utility (SEU) models, which are linear in probabilities, have serious limitations in certain situations. We argue here that these limitations are often highly relevant to the work that environmental and natural resource economists do. We discuss some of the experimental evidence and alternatives to the SEU. We consider the theory used, the problems studied, and the methods employed by resource economists. Finally, we highlight some recent work that has begun to use some of the alternatives to the EU and SEU frameworks and discuss areas where much future work is needed. #

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Uncertainty Aversion, Risk Aversion, and the Optimal Choice of Portfolio

Cited by 642 publications

References 9 publications

Strategic Complements, Substitutes, and Ambiguity: The Implications for Public Goods

Strategic Complements, Substitutes, and Ambiguity: The Implications for Public Goods

On Independence for Non-Additive Measures, with a Fubini Theorem

Why environmental and resource economists should care about non-expected utility models

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