Arbeitspapier
Dynamic consistent alpha-maxim expected utility
We establish a class of fully nonlinear conditional expectations. Similarly to the usage of linear expectations when a probabilistic description of uncertainty is present, we observe analogue quantitative and qualitative properties. The type of nonlinearity captures the agents sentiments of optimism and pessimism in an ambiguous environment. We then introduce an expected utility under a nonlinear expectation, and show monotonicity and continuity of utility. Risk aversion is characterized, and the properties of the certainty equivalent are discussed. Finally, we derive an Arrow-Pratt approximation of the static certainty equivalent and investigate the dynamic version via recursive equations.
- Sprache
-
Englisch
- Erschienen in
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Series: Center for Mathematical Economics Working Papers ; No. 535
- Klassifikation
-
Wirtschaft
Mathematical Methods; Programming Models; Mathematical and Simulation Modeling: General
Criteria for Decision-Making under Risk and Uncertainty
Micro-Based Behavioral Economics: General‡
- Thema
-
nonlinear expectation
Knightian Uncertainty
time consistency
risk aversion
certainty equivalent
optimism and pessimism
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Beißner, Patrick
Lin, Qian
- Ereignis
-
Veröffentlichung
- (wer)
-
Bielefeld University, Center for Mathematical Economics (IMW)
- (wo)
-
Bielefeld
- (wann)
-
2015
- DOI
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doi:10.2139/ssrn.2562354
- Handle
- URN
-
urn:nbn:de:0070-pub-27189099
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Beißner, Patrick
- Lin, Qian
- Bielefeld University, Center for Mathematical Economics (IMW)
Entstanden
- 2015
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