Publication Date: September 2019
Revision Date: October 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;see technical appendix 1. Solving the smooth aﬀective Afriat inequalities is Np-hard; see technical appendices 2, 3, and 4. 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; see technical appendices 5 and 6. The methods of elicitation are generalized estimating equations (GEE) and alternating logistic regression (ALR); see technical appendices; 7 and 8.
Keywords: Rationality, Behavioral Finance, Well Being
JEL Classification Codes: D91, G41, I31CFDP 2202