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Two-moments decision models and utility-representable preferences

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  • Bar-Shira, Ziv
  • Finkelshtain, Israel

Abstract

If a decision problem satisfies Meyer's location-scale condition, then any utility-representable preferences are also representable by a mean standard deviation utility function. The properties of this function are inferred from common assumptions concerning the individual's risk preferences, without relying on the expected utility model or any of its substitutes.
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  • Bar-Shira, Ziv & Finkelshtain, Israel, 1999. "Two-moments decision models and utility-representable preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 38(2), pages 237-244, February.
    • Handle: RePEc:eee:jeborg:v:38:y:1999:i:2:p:237-244
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    References listed on IDEAS

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    1. Sinn, Hans-Werner, 1989. "Two-Moment Decision Models and Expected Utility Maximization: Comment," American Economic Review, American Economic Association, vol. 79(3), pages 601-602, June.
    2. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
    3. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 25(2), pages 65-86.
    4. Yaari, Menahem E., 1969. "Some remarks on measures of risk aversion and on their uses," Journal of Economic Theory, Elsevier, vol. 1(3), pages 315-329, October.
    5. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
    6. Howard D. Leathers & John C. Quiggin, 1991. "Interactions between Agricultural and Resource Policy: The Importance of Attitudes toward Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 757-764.
    7. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    8. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-430, June.
    9. Ormiston, Michael B & Quiggin, John, 1993. "Two-Parameter Decision Models and Rank-Dependent Expected Utility," Journal of Risk and Uncertainty, Springer, vol. 7(3), pages 273-282, December.
    10. Jack Meyer & Lindon J. Robison, 1988. "Hedging Under Output Price Randomness," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(2), pages 268-272.
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    Cited by:

    1. Broll, Udo & Wong, Wing-Keung & Wu, Mojia, 2013. "Banking Firm and Two-Moment Decision Making," MPRA Paper 51687, University Library of Munich, Germany.
    2. Eichner, Thomas, 2004. "A further remark on two-moment decision models and utility-representable preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 435-436, November.
    3. Udo Broll & Jack E. Wahl, 2004. "Optimal hedge ratio and elasticity of risk aversion," Economics Bulletin, AccessEcon, vol. 6(5), pages 1-7.
    4. Hafezalkotob, Ashkan & Makui, Ahmad, 2015. "Cooperative maximum-flow problem under uncertainty in logistic networks," Applied Mathematics and Computation, Elsevier, vol. 250(C), pages 593-604.
    5. Håkan Eggert & Ragnar Tveteras, 2004. "Stochastic Production and Heterogeneous Risk Preferences: Commercial Fishers' Gear Choices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 199-212.
    6. repec:ebl:ecbull:v:6:y:2004:i:5:p:1-7 is not listed on IDEAS
    7. Bar-Shira, Ziv & Finkelshtain, Israel, 2002. "Reply to Gelles and Mitchell," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 429-431, November.
    8. Xavier Brusset, 2005. "The impact of coordination and information on transport procurement," Microeconomics 0504007, University Library of Munich, Germany.
    9. Wagener, Andreas, 2003. "Comparative statics under uncertainty: The case of mean-variance preferences," European Journal of Operational Research, Elsevier, vol. 151(1), pages 224-232, November.
    10. Ohmura, Shota & Matsuo, Hirofumi, 2016. "The effect of risk aversion on distribution channel contracts: Implications for return policies," International Journal of Production Economics, Elsevier, vol. 176(C), pages 29-40.
    11. Robert G. Chambers & Margarita Genius & Vangelis Tzouvelekas, 2021. "Invariant Risk Preferences and Supply Response under Price Risk," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1802-1819, October.
    12. Seifert, Ralf W. & Thonemann, Ulrich W. & Hausman, Warren H., 2004. "Optimal procurement strategies for online spot markets," European Journal of Operational Research, Elsevier, vol. 152(3), pages 781-799, February.
    13. Gelles, Gregory M. & Mitchell, Douglas W., 2002. "Two-moment decision models and utility-representable preferences: a comment on Bar-Shira and Finkelshtain," Journal of Economic Behavior & Organization, Elsevier, vol. 49(3), pages 423-427, November.

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