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Duet expectile preferences

Author

Listed:
  • Fabio Bellini
  • Tiantian Mao
  • Ruodu Wang
  • Qinyu Wu

Abstract

We introduce a novel axiom of co-loss aversion for a preference relation over the space of acts, represented by measurable functions on a suitable measurable space. This axiom means that the decision maker, facing the sum of two acts, dislikes the situation where both acts realize as losses simultaneously. Our main result is that, under strict monotonicity and continuity, the axiom of co-loss aversion characterizes preference relations represented by a new class of functionals, which we call the duet expectiles. A duet expectile involves two endogenous probability measures, and it becomes a usual expectile, a statistical quantity popular in regression and risk measures, when these two probability measures coincide. We discuss properties of duet expectiles and connections with fundamental concepts including probabilistic sophistication, risk aversion, and uncertainty aversion.

Suggested Citation

  • Fabio Bellini & Tiantian Mao & Ruodu Wang & Qinyu Wu, 2024. "Duet expectile preferences," Papers 2404.17751, arXiv.org.
    • Handle: RePEc:arx:papers:2404.17751
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    File URL: http://arxiv.org/pdf/2404.17751
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