Dual theory of choice with multivariate risks

Alfred Galichon, Marc Henry

Research output: Contribution to journalArticlepeer-review

14 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)1501-1516
Number of pages16
JournalJournal of Economic Theory
Volume147
Issue number4
DOIs
StatePublished - Jul 2012

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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