Social Exclusion, Ambiguity and (IR)rationality

53 Pages Posted: 2 Oct 2019

See all articles by Donald Brown

Donald Brown

Yale University - Cowles Foundation

Annette Krauss

University of Zurich - Department of Banking and Finance / CSP

Date Written: October 1, 2019


This working paper extends the methodology of non-smooth affective portfolio theory (APT) for eliciting (IR)rational preferences of investors endowed with continuous quasilinear utility functions, where assets are portfolios of risky and ambiguous state-contingent claims. The elicitation is a solution of the affective Afriat inequalities. Solving the smooth affective Afriat inequalities is Np-hard. The proposed extension is a methodology for the elicitation of (IR)rational preferences of individuals endowed with random continuous quasilinear utility functions defined over finite subsets of discrete social goods as a refutable model of social exclusion in the incomplete markets for social goods. The methods of elicitation are generalized estimating equations (GEE) and alternating logistic regression (ALR).

Keywords: Rationality, Behavioral Finance, Well Being

JEL Classification: D91, G41, I31

Suggested Citation

Brown, Donald J. and Krauss, Annette, Social Exclusion, Ambiguity and (IR)rationality (October 1, 2019). Cowles Foundation Discussion Paper No. 2202R, October 2019, Available at SSRN: or

Donald J. Brown (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Annette Krauss

University of Zurich - Department of Banking and Finance / CSP ( email )

Rämistrasse 71
Zürich, CH-8006


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