There exist several characterizations of concavity for univariate functions. One of them states that a function is concave if and only if it has nonincreasing differences. This definition provides a natural generalization of concavity for multivariate functions called inframodularity. Inframodular transfers are defined and it is shown that a finite lottery is preferred to another by all expected utility maximizers with an inframodular utility if and only if the first lottery can be obtained from the second via a sequence of inframodular transfers. This result is a natural multivariate generalization of Rothschild and Stiglitzʼs construction based on mean preserving spreads.

Fear of loss, inframodularity, and transfers / A., Mueller; Scarsini, Marco. - In: JOURNAL OF ECONOMIC THEORY. - ISSN 0022-0531. - 147:4(2012), pp. 1490-1500. [10.1016/j.jet.2011.02.002]

Fear of loss, inframodularity, and transfers

SCARSINI, MARCO
2012

Abstract

There exist several characterizations of concavity for univariate functions. One of them states that a function is concave if and only if it has nonincreasing differences. This definition provides a natural generalization of concavity for multivariate functions called inframodularity. Inframodular transfers are defined and it is shown that a finite lottery is preferred to another by all expected utility maximizers with an inframodular utility if and only if the first lottery can be obtained from the second via a sequence of inframodular transfers. This result is a natural multivariate generalization of Rothschild and Stiglitzʼs construction based on mean preserving spreads.
Mean preserving spread; Integral stochastic orders; Risk aversion; Ultramodularity; Dual cones
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11385/17838
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