Document Type
Discussion Paper
Publication Date
9-1-2019
CFDP Number
2202R
CFDP Revision Date
October 1, 2019
CFDP Pages
53
Journal of Economic Literature (JEL) Code(s)
D91, G41, I31
Abstract
This working paper extends the methodology of non-smooth affective portfolio theory (APT) for eliciting (IR)rational preferences of investors endowed with continuous quasilinear utility functions, where assets are portfolios of risky and ambiguous state-contingent claims. The elicitation is a solution of the affective Afriat inequalities;see technical appendix 1. Solving the smooth affective Afriat inequalities is Np-hard; see technical appendices 2, 3, and 4. The proposed extension is a methodology for the elicitation of (IR)rational preferences of individuals endowed with random continuous quasilinear utility functions defined over finite subsets of discrete social goods as a refutable model of social exclusion in the incomplete markets for social goods; see technical appendices 5 and 6. The methods of elicitation are generalized estimating equations (GEE) and alternating logistic regression (ALR); see technical appendices; 7 and 8.
Recommended Citation
Krauss, Annette and Brown, Donald J., "Social Exclusion, Ambiguity and (IR)rationality" (2019). Cowles Foundation Discussion Papers. 48.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/48