Under stochastic dominance Choquet-expected utility and anticipated utility are identical

Choquet Expected Utility

Recent developments in the theory of choice under uncertainty and risk yield a pessimistic decision theory that replaces the classical expected utility criterion with a Choquet expectation that accentuates the likelihood of the least favorable outcomes. A parallel theory has recently emerged in the literature on risk assessment. It is shown that a general form of pessimistic portfolio optimizat...

Pessimistic Portfolio Allocation and Choquet Expected Utility

Recent developments in the theory of choice under uncertainty and risk yield a pessimistic decision theory that replaces the classical expected utility criterion with a Choquet expectation that accentuates the likelihood of the least favorable outcomes. A parallel theory has recently emerged in the literature on risk assessment. It is shown that pessimistic portfolio optimization based on the C...

Inverse stochastic dominance constraints and rank dependent expected utility theory

We consider optimization problems with second order stochastic dominance constraints formulated as a relation of Lorenz curves. We characterize the relation in terms of rank dependent utility functions, which generalize Yaari’s utility functions. We develop optimality conditions and duality theory for problems with Lorenz dominance constraints. We prove that Lagrange multipliers associated with...

Utility Assessment under Expected Utility and Rank Dependent Utility Assumptions

Stochastic Choice and Expected Utility

Dagsvik (2008) has recently extended Debreu’s (1958) representation theorem for stochastic choice to the domain of lotteries. Dagsvik provides conditions under which there exists a linear utility function such that the probability of choosing one alternative over another is represented by the di¤erence in their utilities. We give an alternative, simpler proof of Dagsvik’s result. Our proof deri...