Binary Diversification Characterizes Exact Capacities

In this paper we provide the first axiomatic characterization of preferences that can be represented by a Choquet integral with respect to an exact capacity. The characterizing axiom, Binary Diversification, is novel and states a preference for mixtures resulting in bets on events, i.e., binary acts. Furthermore, we show that the three capacity classes balanced, exact and convex fully exhaust all levels of what we call "hierarchy of ambiguity aversion", a unifying framework for the two most influential definitions of ambiguity aversion suggested by Ghirardato and Marinacci (2002) and Schmeidler (1989)

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Year of publication:	[2023]
Authors:	Hartmann, Lorenz ; Kauffeldt, T. Florian
Publisher:	[S.l.] : SSRN
Subject:	Diversifikation \| Diversification \| Kapazitätsplanung \| Capacity planning \| Produktionskapazität \| Production capacity \| Portfolio-Management \| Portfolio selection \| Präferenztheorie \| Theory of preferences

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