Generalized Expected Utility Analysis of Multivariate Risk Aversion.

This paper extends M. J. Machina's generalized expected utility analysis to preferences over multivariate distributions. Within the extended framework, the relation "more risk averse than" is defined, characterized, and applied to the analysis of consumption-saving decisions under risk. The notion of decreasing risk aversion is also characterized. The paper shows that standard results obtained within the framework of expected utility theory can be extended if the restrictions imposed on the utility function in expected utility theory are imposed on the local utility functions in Machina's theory. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.