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- Title
Diversification, convex preferences and non-empty core in the Choquet expected utility model.
- Authors
Chateauneuf, Alain; Tallon, Jean-Marc
- Abstract
We show, in the Choquet expected utility model, that preference for diversification, that is, convex preferences, is equivalent to a concave utility index and a convex capacity. We then introduce a weaker notion of diversification, namely "sure diversification." We show that this implies that the core of the capacity is non-empty. The converse holds under concavity of the utility index, which is itself equivalent to the notion of comonotone diversification, that we introduce. In an Anscombe-Aumann setting, preference for diversification is equivalent to convexity of the capacity and preference for sure diversification is equivalent to non-empty core. In the expected utility model, all these notions of diversification are equivalent and are represented by the concavity of the utility index.
- Subjects
CHOQUET theory; UTILITY theory; DIVERSIFICATION in industry
- Publication
Economic Theory, 2002, Vol 19, Issue 3, p509
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s001990000152