Article ID Journal Published Year Pages File Type
956564 Journal of Economic Theory 2015 21 Pages PDF
Abstract
When a potential hedge between alternatives does not reduce the exposure to uncertainty, we say that the decision maker considers these alternatives structurally similar. We offer a novel approach and suggest that structural similarity is subjective and should be different across decision makers. Structural similarity can be recovered through a property of the individual's preferences referred to as subjective codecomposable independence. This property characterizes a class of event-separable models and allows us to differentiate between perception of uncertainty and attitude towards it. In addition, our approach provides a behavioral foundation to Concave Expected Utility preferences.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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