Preference for diversification with similarity considerations

Guerdjikova, Ani

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URL:	http://ub-madoc.bib.uni-mannheim.de/2694
URN:	urn:nbn:de:bsz:180-madoc-26940
Document Type:	Working paper
Year of publication:	2004
The title of a journal, publication series:	None
Publication language:	English
Institution:	School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series:	Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject:	330 Economics
Classification:	JEL: D81 D83 ,
Subject headings (SWD):	Entscheidungstheorie , Diversifikation , Nutzentheorie
Keywords (English):	Case-Based Decision Theory , similarity , preference for diversification
Abstract:	The paper studies the connection between the form of the similarity function of a decision-maker and his willingness to diversify. It is shown that preference for diversification obtain for both high and low aspiration levels if the similarity function is convex in the Euclidean distance. However, a decision-maker with a concave similarity function and relatively high aspiration level will fail to choose diversified acts, even if his utility function is concave.
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