An explicit representation for disappointment aversion and other betweenness preferences

Simone Cerreia-Vioglio, David Dillenberger, Pietro Ortoleva

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

One of the most well known models of non-expected utility is Gul's (1991) model 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 representation. We also provide a more general result: an explicit representation for preferences in the betweenness class that also satisfy negative certainty independence (Dillenberger 2010) or its counterpart. We show how our approach gives a simple way to identify the parameters of the representation behaviorally and to study the consequences of disappointment aversion in a variety of applications.

Original languageEnglish (US)
Pages (from-to)1509-1546
Number of pages38
JournalTheoretical Economics
Volume15
Issue number4
DOIs
StatePublished - Nov 2020

All Science Journal Classification (ASJC) codes

  • General Economics, Econometrics and Finance

Keywords

  • Betweenness
  • D80
  • D81
  • cautious expected utility
  • disappointment aversion
  • non-expected utility
  • strategic rationality
  • utility representation

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