Chew Soo Hong, Zhang Xinhan

Thematic seminars
Economic theory seminar

Chew Soo Hong, Zhang Xinhan

National University of Singapore
Axiomatizing Correlation Preference

IBD Salle 24

Îlot Bernard du Bois - Salle 24

5-9 boulevard Maurice Bourdet
13001 Marseille

Friday, June 14 2024| 12:00pm to 1:00pm

Gaëtan Fournier: gaetan.fournier[at]


Building on the emerging literature on correlation preference reflecting regret and salience considerations, we offer an axiomatization of correlation utility (CU) without requiring transitivity or completeness. Under a correlation independence axiom, CU specializes to correlation expected utility (CEU) which is not compatible with behavior in the correlated Allais common-consequence problem. This motivates our correlation betweenness axiom and characterization of the corresponding correlation betweenness utility (CBU). We investigate the implications of an absence of correlation sensitivity as well as (in)completeness for CEU and CBU. Under correlation insensitivity, we demonstrate using the Kantorovich duality that CEU reduces to EU while CBU reduces to a skew-symmetric bilinear utility together with weakening correlation independence to correlation projective independence, reducing further to weighted utility under transitivity. Finally, we characterize correlation distribution reduction preference, subsuming two major generalizations of SEU: one maintains Savage’s Postulate 2 without transitivity (Fishburn, 1989); the other maintains transitivity without Postulate 2 (Machina and Schmeidler, 1992).