IDEAS home Printed from https://ideas.repec.org/p/ags/uqsers/200371.html
   My bibliography  Save this paper

Minimal conditions for parametric continuity of a utility representation

Author

Listed:
  • O'Callaghan, Patrick

Abstract

When sufficiently small perturbations of parameters preserve strict preference for one alternative over another, dependence on the parameters is continuous. We characterise this property with a utility function over alternatives that depends continuously on the parameter. The class of parameter spaces such that this form of representation is guaranteed to exist is also characterised. When the parameters are beliefs, these results have implications for robust portfolio choice, Bayesian games and psychological games. When alternatives are discrete, the representation is jointly continuous, and an extension of Berge’s theorem of the maximum, yields a continuous value function. We apply this result to generalise a standard consumer choice problem: where parameters are price-wealth vectors. When the parameter space is lexicographically ordered, a novel application to referencedependent preferences is possible.

Suggested Citation

  • O'Callaghan, Patrick, 2015. "Minimal conditions for parametric continuity of a utility representation," Risk and Sustainable Management Group Working Papers 200371, University of Queensland, School of Economics.
    • Handle: RePEc:ags:uqsers:200371
    DOI: 10.22004/ag.econ.200371
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/200371/files/WPF15_3.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.200371?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Siddiqi, Hammad, 2014. "Analogy Making and the Structure of Implied Volatility Skew," MPRA Paper 60921, University Library of Munich, Germany.
    2. Siddiqi, Hammad, 2015. "Analogy based Valuation of Commodity Options," MPRA Paper 61083, University Library of Munich, Germany.
    3. Furnham, Adrian & Boo, Hua Chu, 2011. "A literature review of the anchoring effect," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(1), pages 35-42, February.
    4. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    5. Siddiqi, Hammad, 2009. "Does Coarse Thinking Matter for Option Pricing? Evidence from an Experiment," MPRA Paper 13515, University Library of Munich, Germany.
    6. Siddiqi, Hammad, 2014. "Analogy Making and the Structure of Implied Volatility Skew," Risk and Sustainable Management Group Working Papers 187407, University of Queensland, School of Economics.
    7. Rötheli, Tobias F., 2010. "Causes of the financial crisis: Risk misperception, policy mistakes, and banks' bounded rationality," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(2), pages 119-126, April.
    8. Siddiqi, Hammad, 2009. "Is the lure of choice reflected in market prices? Experimental evidence based on the 4-door Monty Hall problem," Journal of Economic Psychology, Elsevier, vol. 30(2), pages 203-215, April.
    9. repec:bla:jfinan:v:59:y:2004:i:2:p:711-753 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Siddiqi, Hammad, 2015. "Relative Risk Perception and the Puzzle of Covered Call writing," MPRA Paper 62763, University Library of Munich, Germany.
    2. Siddiqi, Hammad, 2015. "Relative Risk Perception and the Puzzle of Covered Call Writing," Risk and Sustainable Management Group Working Papers 199882, University of Queensland, School of Economics.
    3. Siddiqi, Hammad, 2015. "Analogy Based Valuation of Currency Options," MPRA Paper 62333, University Library of Munich, Germany.
    4. Siddiqi, Hammad, 2015. "Analogy Based Valuation of Currency Options," Risk and Sustainable Management Group Working Papers 198776, University of Queensland, School of Economics.
    5. Siddiqi, Hammad, 2014. "Anchoring Heuristic in Option Prices," MPRA Paper 66018, University Library of Munich, Germany, revised 15 Jul 2015.
    6. Siddiqi, Hammad, 2015. "Explaining the Smile in Currency Options: Is it Anchoring?," MPRA Paper 63528, University Library of Munich, Germany.
    7. Siddiqi, Hammad, 2015. "Anchoring and Adjustment Heuristic in Option Pricing," MPRA Paper 68595, University Library of Munich, Germany.
    8. Siddiqi, Hammad, 2015. "Anchoring Heuristic in Option Pricing," MPRA Paper 63218, University Library of Munich, Germany.
    9. Siddiqi, Hammad, 2015. "Anchoring Heuristic in Option Pricing," Risk and Sustainable Management Group Working Papers 207677, University of Queensland, School of Economics.
    10. Hammad, Siddiqi, 2015. "Index Option Returns from an Anchoring Perspective," MPRA Paper 65331, University Library of Munich, Germany.
    11. Siddiqi, Hammad, 2013. "Analogy Making, Option Prices, and Implied Volatility," MPRA Paper 48862, University Library of Munich, Germany.
    12. Siddiqi, Hammad, 2015. "Behavioralizing the Black-Scholes Model," MPRA Paper 86234, University Library of Munich, Germany.
    13. Siddiqi, Hammad, 2013. "Analogy Making in Complete and incomplete Markets: A New Model for Pricing Contingent Claims," Risk and Sustainable Management Group Working Papers 160608, University of Queensland, School of Economics.
    14. Siddiqi, Hammad, 2013. "Mental Accounting: A Closed-Form Alternative to the Black Scholes Model," MPRA Paper 50759, University Library of Munich, Germany.
    15. Siddiqi, Hammad, 2014. "The Financial Market Consequences of Growing Awareness: The Case of Implied Volatiltiy Skew," Risk and Sustainable Management Group Working Papers 162568, University of Queensland, School of Economics.
    16. Siddiqi, Hammad, 2013. "Analogy Making In Complete and Incomplete Markets: A New Model for Pricing Contingent Claims," Risk and Sustainable Management Group Working Papers 156934, University of Queensland, School of Economics.
    17. Siddiqi, Hammad, 2014. "Analogy Making and the Structure of Implied Volatility Skew," MPRA Paper 60921, University Library of Munich, Germany.
    18. Siddiqi, Hammad, 2015. "Analogy based Valuation of Commodity Options," MPRA Paper 61083, University Library of Munich, Germany.
    19. Ben Abdallah, Skander & Lasserre, Pierre, 2016. "Asset retirement with infinitely repeated alternative replacements: Harvest age and species choice in forestry," Journal of Economic Dynamics and Control, Elsevier, vol. 70(C), pages 144-164.
    20. Wettstein, Dominik J. & Boes, Stefan, 2022. "How value-based policy interventions influence price negotiations for new medicines: An experimental approach and initial evidence," Health Policy, Elsevier, vol. 126(2), pages 112-121.

    More about this item

    Keywords

    Risk and Uncertainty;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:uqsers:200371. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/decuqau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.