TY - JOUR

T1 - Efficient sets with and without the expected utility hypothesis

AU - Safra, Zvi

AU - Zilcha, Itzhak

PY - 1988

Y1 - 1988

N2 - Consider a feasible set, X, of c.d.f.'s. Assume that the set of decision makers, who must choose from X, includes non-expected utility decision makers who are risk averse in some weaker notions. We show that in this case the efficient set of X expands relative to the expected utility case. We characterize the efficient sets for each notion of risk aversion including the expected utility case. It is also shown that the limited-coverage insurance policies, which are not efficient under the expected utility hypothesis, belong to the efficient set when weakly risk-averse non- expected utility functionals are assumed to exist.

AB - Consider a feasible set, X, of c.d.f.'s. Assume that the set of decision makers, who must choose from X, includes non-expected utility decision makers who are risk averse in some weaker notions. We show that in this case the efficient set of X expands relative to the expected utility case. We characterize the efficient sets for each notion of risk aversion including the expected utility case. It is also shown that the limited-coverage insurance policies, which are not efficient under the expected utility hypothesis, belong to the efficient set when weakly risk-averse non- expected utility functionals are assumed to exist.

UR - http://www.scopus.com/inward/record.url?scp=38249032039&partnerID=8YFLogxK

U2 - 10.1016/0304-4068(88)90018-3

DO - 10.1016/0304-4068(88)90018-3

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AN - SCOPUS:38249032039

SN - 0304-4068

VL - 17

SP - 369

EP - 384

JO - Journal of Mathematical Economics

JF - Journal of Mathematical Economics

IS - 4

ER -