Zero utility principles coinciding on binary risks. (English) Zbl 1530.39014
Summary: It is known that the zero utility principle under Cumulative Prospect Theory can be uniquely extended from the family of all ternary risks. On the other hand, the extension from the family of all binary risks need not be unique. We establish a characterization of those zero utility principles which coincide on the family of binary risks. The characterization is expressed in terms of relations between the systems of generators of the principles.
MSC:
| 39B12 | Iteration theory, iterative and composite equations |
| 39B82 | Stability, separation, extension, and related topics for functional equations |
| 91B16 | Utility theory |
| 91B05 | Risk models (general) |
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