Dual theory of choice under multivariate risks
Journal of Economic Theory
US : Elsevier B.V.
1501 - 1516 p.
Risk, Rank dependent utility theory, Multivariate comonotonicity, Optimal transportation, Multi-attribute inequality, Gini evaluation functions
We propose a multivariate extension of Yaari's dual theory of choice under risk. We show that a decision maker with a preference relation on multidimensional prospects that preserves ¯rst order stochastic dominance and satis¯es comonotonic in-dependence behaves as if evaluating prospects with a weighted sum of quantiles. Both the notions of quantiles and of comonotonicity are extended to the multivariate framework using optimal transportation maps. Finally risk averse decision makers are characterized, and we show how to efficiently compute the functionals they use to evaluate prospects.