The preservation of multivariate comparative statics in nonexpected utility theory |
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Authors: | Edward E. Schlee |
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Affiliation: | 1. Department of Economics, Arizona State University, 85287-3806, Tempe, AZ
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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. |
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