Comparative Statics for the Subjective

TL;DR

This paper develops robust comparative statics for risk-averse subjective expected utility maximizers, identifying how menu transformations influence decision-making regardless of specific utility or beliefs.

Contribution

It introduces a method to determine menu transformations that lead to lower actions under broad classes of non-EU preferences, enhancing understanding of decision robustness.

Findings

Steepening payoffs causes a guaranteed decrease in chosen actions.

A slightly weaker steepening also leads to lower actions.

Results apply broadly beyond EU preferences.

Abstract

I study robust comparative statics for risk-averse subjective expected utility (SEU) maximizers. Starting with a finite menu of actions totally ordered by sensitivity to risk, I identify the transformations of her menu that lead a decision-maker to take a lower action, regardless of her particular utility function or belief. My main results reveal that a robust decrease in the action selected is guaranteed by an intuitive steepening/tilting of the actions' payoffs and necessitates a slightly weaker such steepening. This basic pattern generalizes to a broad class of non-EU preferences.