Webis not true of expected utility. Expected utility do satisfy the weaker property, however, that they are preserved by a ffine (increasing linear) transformations. Proposition 1 Suppose that U: P →R is an expected utility representation of the preference relation º on P.ThenV: P →R is an expected utility representation Web(rational inattention or RI) in a setting with recursive utility. We nd that rational inattention combined with a preference for early resolution of uncertainty could lead to a signi cant drop in the share of portfolios held in risky assets, even when the departure from standard expected utility with rational expectations is small.

Source Recursive Expected Utility on Rich Mixture Sets

http://www.columbia.edu/~md3405/BE_Final_Solution_12.pdf WebEPZ recursive utility obtains by taking W(y,z) = (yα +δzα)1/α (4) and µt(w) = [Et(w1−ρ)]1/(1−ρ) (5) where ρ and α are two separate parameters. Put together, the … ghostbuster phone number in movie

Nonexpected Utility in Macroeconomics - JSTOR

WebShow that, for a recursive expected utility maximizer the compound lottery in example ais indi erent to receiving the lottery that gives $5 with probability 1 6, $4 with probability 1 3 and $0 with probability 2 Answer The recursive expected utility of the lottery s, where s= 1 6; 1 3; 1 2 to prices (5;4;0), it is just the expected utility of ... WebThe “anchor” is the expected utility of the prospect under consideration, computed with re- spect to abaseline probability; the “adjustment” depends upon itsexposure to distinct … WebThe “anchor” is the expected utility of the prospect under consideration, computed with re- spect to abaseline probability; the “adjustment” depends upon itsexposure to distinct sources of ambiguity, as well as itsvariationaway from the anchor at states that the individual deems ambiguous. ghostbuster phone