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Stochastic Dynamic Utilities and Inter-Temporal Preferences

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  • Marco Maggis
  • Andrea Maran

Abstract

We propose an axiomatic approach which economically underpins the representation of dynamic preferences in terms of a stochastic utility function, sensitive to the information available to the decision maker. Our construction is iterative and based on inter-temporal preference relations, whose characterization is inpired by the original intuition given by Debreu's State Dependent Utilities (1960).

Suggested Citation

  • Marco Maggis & Andrea Maran, 2018. "Stochastic Dynamic Utilities and Inter-Temporal Preferences," Papers 1803.05244, arXiv.org, revised Feb 2020.
    • Handle: RePEc:arx:papers:1803.05244
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    References listed on IDEAS

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    1. Drapeau, Samuel & Jamneshan, Asgar, 2016. "Conditional preference orders and their numerical representations," Journal of Mathematical Economics, Elsevier, vol. 63(C), pages 106-118.
    2. Castagnoli, Erio & LiCalzi, Marco, 2006. "Benchmarking real-valued acts," Games and Economic Behavior, Elsevier, vol. 57(2), pages 236-253, November.
    3. Karni, Edi, 1983. "Risk Aversion for State-Dependent Utility Functions: Measurement and Applications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 637-647, October.
    4. Samuel Drapeau & Asgar Jamneshan, 2014. "Conditional Preference Orders and their Numerical Representations," Papers 1410.5466, arXiv.org, revised Jan 2016.
    5. Marco Frittelli & Marco Maggis, 2011. "Conditional Certainty Equivalent," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 14(01), pages 41-59.
    6. Peter P. Wakker & Horst Zank, 1999. "State Dependent Expected Utility for Savage's State Space," Mathematics of Operations Research, INFORMS, vol. 24(1), pages 8-34, February.
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