631. An Explicit Representation for Disappointment Aversion and Other Betweenness Preferences

by Simone Cerreia-Vioglio, David Dillenberger, Pietro Ortoleva

One of the most well-known models of non-expected utility is Gul (1991)’s bmodel of Disappointment Aversion. This model, however, is defined implicitly, as the solution to a functional equation; its explicit utility representation is unknown, which may limit its applicability. We show that an explicit representation can be easily constructed, using solely the components of the implicit one. We also provide a more general result: an explicit representation for preferences in the Betweenness class that also satisfy Negative Certainty Independence (Dillenberger, 2010).

JEL: D80, D81

KEYWORDS: Betweenness, Cautious Expected Utility, Disappointment Aversion, Utility representation.    

Last updated October 19, 2018