Results 1  10
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18
Subjective Probabilities on Subjectively Unambiguous Events
 ECONOMETRICA
, 1998
"... Evidence such as the Ellsberg Paradox shows that decisionmakers do not assign probabilities to all events. It is intuitive that they may differ not only in the probabilities assigned to given events but also in the identity of the events to which they assign probabilities. This paper describes a th ..."
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Cited by 58 (0 self)
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Evidence such as the Ellsberg Paradox shows that decisionmakers do not assign probabilities to all events. It is intuitive that they may differ not only in the probabilities assigned to given events but also in the identity of the events to which they assign probabilities. This paper describes a theory of probability that is fully subjective in the sense that both the domain and the values of the probability measure are derived from preference. The key is a formal definition of `subjectively unambiguous event.'
Optimal risk sharing with background risk
, 2005
"... This paper examines qualitative properties of efficient insurance contracts in the presence of background risk. In order to get results for all strictly risk averse expected utility maximizers, the concept of “stochastic increasingness ” is used. Different assumptions on the stochastic dependence be ..."
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Cited by 17 (0 self)
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This paper examines qualitative properties of efficient insurance contracts in the presence of background risk. In order to get results for all strictly risk averse expected utility maximizers, the concept of “stochastic increasingness ” is used. Different assumptions on the stochastic dependence between the insurable and uninsurable risk lead to different qualitative properties of the efficient contracts. The new results obtained under hypotheses of dependent risks are compared to classical results in the absence of background risk or to the case of independent risks. The theory is further generalized to nonexpected utility maximizers. Key words: insurance, efficient contracts, incomplete markets, stochastically increasing. JEL Classification: D52, G22. 1
2001a), A Generalization of PrattArrow Measure to NonExpectedUtility Preferences and Inseparable Probability and Utility. Working paper, Fuqua School of Business
 Preferences And Inseparable Probability And Utility. Management Science 49:8, 1089
, 2003
"... The PrattArrow measure of local risk aversion is generalized for the ndimensional statepreference model of choice under uncertainty in which the decision maker may have inseparable subjective probabilities and utilities, unobservable stochastic prior wealth, and/or smoothnonexpectedutility prefe ..."
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Cited by 12 (7 self)
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The PrattArrow measure of local risk aversion is generalized for the ndimensional statepreference model of choice under uncertainty in which the decision maker may have inseparable subjective probabilities and utilities, unobservable stochastic prior wealth, and/or smoothnonexpectedutility preferences. Local risk aversion is measured by the matrix of derivatives of the decision maker’s riskneutral probabilities, without reference to true subjective probabilities or riskless wealthpositions, and comparative risk aversion is measured without requiring agreement on true probabilities. Riskneutral probabilities and their derivatives are shown to be sufficient statistics for approximately optimal investment and financing decisions in complete markets for contingent claims.
Rearrangement inequalities in non convex insurance models
 Journal of Mathematical Economics
"... This paper is motivated by a large variety of convex or non convex problems arising in symmetric and asymmetric information models. An existence theorem is proven, based on a supermodular version of HardyLittlewood’s rearrangement inequalities. Sufficient conditions for monotonicity of optimal solu ..."
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Cited by 9 (5 self)
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This paper is motivated by a large variety of convex or non convex problems arising in symmetric and asymmetric information models. An existence theorem is proven, based on a supermodular version of HardyLittlewood’s rearrangement inequalities. Sufficient conditions for monotonicity of optimal solutions are provided. Several applications to insurance are given.
Pareto efficient insurance contracts when the insurer’s cost function is discontinuous
 Economic Theory
, 2003
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Revenue Comparisons for Auctions when Bidders Have Arbitrary Types
, 2004
"... This paper develops a methodology for characterizing expected revenue from auctions in which bidders’ types come from an arbitrary distribution. In particular, types may be multidimensional, and there may be mass points in the distribution. One application extends existing revenue equivalence resul ..."
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Cited by 3 (1 self)
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This paper develops a methodology for characterizing expected revenue from auctions in which bidders’ types come from an arbitrary distribution. In particular, types may be multidimensional, and there may be mass points in the distribution. One application extends existing revenue equivalence results. Another application shows that firstprice auctions yield higher expected revenue than secondprice auctions when bidders are risk averse and/or face financial constraints. This revenue ranking also extends to riskaverse bidders with general forms of nonexpected utility preferences.
Risk premiums and benefit measures for generalizedexpectedutility theories
 Journal of Risk and Uncertainty
, 1998
"... Over the past �fteen years, the theory of choice under uncertainty has undergone radical change. The pivotal contribution was Machina�s (1982) demonstration that a large class of preferences could be locally approximated by expectedutility functionals and that global preferences inherited propertie ..."
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Cited by 2 (0 self)
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Over the past �fteen years, the theory of choice under uncertainty has undergone radical change. The pivotal contribution was Machina�s (1982) demonstration that a large class of preferences could be locally approximated by expectedutility functionals and that global preferences inherited properties, such as risk aversion, of the local utility functions. Less progress has been made, however, in developing tools relating to nonlocal properties of preferences such as the absolute and relative risk premiums used in expectedutility theory. During this same period, however, the literature on choice under certainty made substantial progress in developing new techniques for characterizing preferences and technologies using the concepts of distance (Färe, 1988) and bene�t functions (Luenberger, 1992). In particular, Luenberger (1992, 1994) introduced the bene�t function and demonstrated its usefulness in characterizing preferences and Paretoefficient outcomes. It is natural, therefore, to ask whether these techniques can be informatively applied to problems of choice under uncertainty. This paper shows that a wide range of standard tools for the analysis of economic
From sure to strong diversification
 Journal of Economic theory
, 2007
"... This paper presents a characterization of weak risk aversion in terms of preference for sure diversification. Similarly, we show that strong risk aversion can be characterized by weakening preference for diversification, as introduced by Dekel [11], in what we name preference for strong diversificat ..."
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This paper presents a characterization of weak risk aversion in terms of preference for sure diversification. Similarly, we show that strong risk aversion can be characterized by weakening preference for diversification, as introduced by Dekel [11], in what we name preference for strong diversification.
Smooth Nonexpected Utility without State Independence ∗
, 2005
"... We propose a notion of smoothness of nonexpected utility functions, which extends the variational analysis of nonexpected utility functions to more general settings. In particular, our theory applies to state dependent utilities, as well as the multiple prior expected utility model, both of which ar ..."
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We propose a notion of smoothness of nonexpected utility functions, which extends the variational analysis of nonexpected utility functions to more general settings. In particular, our theory applies to state dependent utilities, as well as the multiple prior expected utility model, both of which are not possible in previous literatures. Other nonexpected utility models are shown to satisfy smoothness under more general conditions than the Fréchet and Gateaux differentiability used in the literature. We give more general characterizations of monotonicity and risk aversion without assuming state independence of utility function. Ai, University of Minnesota and Federal Reserve Bank of Minneapolis. I thank Michele Boldrin for his advice and continuous encouragement. I thank David Levine for helpful comments. All errors are mine. The views expressed herein are those of the author and not necessarily those of the Federal Reserve Bank of Minneapolis or the
CEREMADE
, 2004
"... We discuss the qualitative properties of efficient insurance contracts in the presence of background risk. In order to get results for all strictly risk averse expected utility maximizers, we use the concept of “stochastic increasingness. ” We show that different assumptions on the stochastic depend ..."
Abstract
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We discuss the qualitative properties of efficient insurance contracts in the presence of background risk. In order to get results for all strictly risk averse expected utility maximizers, we use the concept of “stochastic increasingness. ” We show that different assumptions on the stochastic dependence between the insurable and uninsurable risk lead to different optimal contracts. We compare our results to the classical results in the absence of background risk or to the case of independent risks. The theory is further generalized to nonexpected utility maximizers. JEL Classification: D52, G22