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Common Mathematical Foundations of Expected Utility and Dual Utility Theories

Darinka Dentcheva(darinka.dentcheva***at***stevens.edu)
Andrzej Ruszczynski(rusz***at***business.rutgers.edu)

Abstract: We show that the main results of the expected utility and dual utility theories can be derived in a unified way from two fundamental mathematical ideas: the separation principle of convex analysis, and integral representations of continuous linear functionals from functional analysis. Our analysis reveals the dual character of utility functions. We also derive new integral representations of dual utility models.

Keywords: Preferences, Utility Functions, Rank Dependent Utility Functions, Separation, Choquet Representation

Category 1: Stochastic Programming


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Entry Submitted: 12/20/2012
Entry Accepted: 12/20/2012
Entry Last Modified: 12/20/2012

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