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CONSISTENT RANKINGS BASED ON TOTAL AND DIFFERENTIAL AMOUNTS UNDER UNCERTAINTY *
Author(s) -
Ekern Steiner,
Bøhren ØSyvind
Publication year - 1979
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1979.tb00044.x
Subject(s) - differential (mechanical device) , diversification (marketing strategy) , valuation (finance) , context (archaeology) , econometrics , mathematics , economics , exponential function , mathematical economics , statistics , mathematical analysis , thermodynamics , physics , business , biology , accounting , paleontology , marketing
Rankings of decision alternatives based on total and on differential monetary amounts may in general be inconsistent under uncertainty. In the following cases, either approach is valid and hence yields consistent rankings: (i) with expected values, provided that the differential amounts have been coherently determined and are constant within states (but may differ across states); (ii) with exponential utility functions if the shared and differential amounts are statistically independent; or (iii) in a market valuation context, assuming diversification and implicit separate market values for differential and shared amounts.