Abstract

http://ssrn.com/abstract=2148874
 


 



Envy and Altruism: Contrasting Bivariate and Univariate Prospect Preferences


Guy Kaplanski


Bar-Ilan University - Graduate School of Business Administration

Haim Levy


Hebrew University of Jerusalem - Jerusalem School of Business Administration; Fordham University

July 2014


Abstract:     
The effect of envy and altruism on investment choices is analyzed by employing utility-free bivariate First-degree Stochastic Dominance (FSD) rule. Using the classic expected utility as the benchmark we find that envy or altruism may induce univariate FSD violation, hence a violation of the classic expected utility monotonicity axiom. Thus, the negative result is that an FSD inferior prospect may be selected inducing expected utility loss. Surprisingly, not only envy but also altruism may induce “contingent money burning” causing a reduction in the classic univariate expected utility of both the investor and her peer group. The positive result is that the bivariate SD efficient set always contains the univaraite SD efficient set. Hence, for some investors a careful selection from the bivariate efficient set may avoid the economic loss.

Number of Pages in PDF File: 42

Keywords: bivariate preferences, envy, altruism, expected utility burning, contingent money burning, stochastic dominance, decision-making, efficiency analysis

JEL Classification: A13, C02, C91, D64, D81, G11


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Date posted: September 19, 2012 ; Last revised: May 4, 2015

Suggested Citation

Kaplanski, Guy and Levy, Haim, Envy and Altruism: Contrasting Bivariate and Univariate Prospect Preferences (July 2014). Available at SSRN: http://ssrn.com/abstract=2148874 or http://dx.doi.org/10.2139/ssrn.2148874

Contact Information

Guy Kaplanski (Contact Author)
Bar-Ilan University - Graduate School of Business Administration ( email )
Ramat Gan
Israel
Haim Levy
Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )
Mount Scopus
Jerusalem, 91905
Israel
Fordham University ( email )
140 West 62nd Street
New York, NY 10023
United States

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