Smooth nonexpected utility without state independence
Abstract: 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 Frchet and Gateaux differentiability used in the literature. We give more general characterizations of monotonicity and risk aversion without assuming state independence of utility function.
File(s): File format is application/pdf http://www.minneapolisfed.org/research/common/pub_detail.cfm?pb_autonum_id=1037
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Working Papers
Publication Date: 2005