Iterated expectations under rank‐dependent expected utility and implications for common valuation methods
研究了在决策者偏好符合秩依期望效用模型时，金融中常见估值技术的适用条件，推导出在共同单调类中类似迭代期望估值法的充要条件，这些条件与动态一致性条件一致。
Abstract This paper investigates the applicability of common valuation techniques in finance when the decision‐maker's preferences can be described by the rank‐dependent expected utility model. Under expected utility theory, compound lotteries can be valued by “iterating” expectations: the expected utility of a compound lottery is the expected value of a simple lottery over prizes that are certainty equivalents to follow‐up lotteries. We derive necessary and sufficient conditions for a similar valuation technique in the framework of rank‐dependent expected utility when a consequentialist decision‐maker has to choose between prospects that belong to a comonotonic class. The conditions coincide with those for dynamically consistent behaviour of such a decision‐maker. The decision‐maker must update her preferences based on a benchmark prospect that can be interpreted as a formalization of “black‐and‐white thinking.”