Summary.
We show, in the Choquet expected utility model, that preference for diversification, that is, convex preferences, is equivalent to a concave utility index and a convex capacity. We then introduce a weaker notion of diversification, namely “sure diversification.” We show that this implies that the core of the capacity is non-empty. The converse holds under concavity of the utility index, which is itself equivalent to the notion of comonotone diversification, that we introduce. In an Anscombe-Aumann setting, preference for diversification is equivalent to convexity of the capacity and preference for sure diversification is equivalent to non-empty core. In the expected utility model, all these notions of diversification are equivalent and are represented by the concavity of the utility index.
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Received: July 27, 1999; revised version: November 7, 2000
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Chateauneuf, A., Tallon, JM. Diversification, convex preferences and non-empty core in the Choquet expected utility model. Econ Theory 19, 509–523 (2002). https://doi.org/10.1007/s001990000152
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DOI: https://doi.org/10.1007/s001990000152