CIRJE-F-836 "Local Utility and Multivariate Risk Aversion"
Author Name Charpentier, Arthur, Alfred Galichon and Marc Henry
Date January 2012
Full Paper   PDF file
Remarks  Submitted for publication.
  We revisit Machina's local utility as a tool to analyze attitudes to multivariate risks. Using martingale embedding techniques, we show that for nonexpected utility maximizers choosing between multivariate prospects, aversion to multivariate mean preserving increases in risk is equivalent to the concavity of the local utility functions, thereby generalizing Machina's result in [18]. To analyze comparative risk attitudes within the multivariate extension of rank dependent expected utility of [10], we extend Quiggin's monotone mean and utility preserving increases in risk and show that the useful characterization given in [17] still holds in the multivariate case.