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An Explicit Representation for Disappointment Aversion and Other Betweenness Preferences

Number: 631
Year: 2018
Author(s): 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).

Keywords: Betweenness, Cautious Expected Utility, Disappointment Aversion, Utility representation
JEL codes: D80, D81