Bray Theory Workshop

We characterize the consistency of a large class of nonexpected utility preferences (for example, mean-variance preferences or prospect theory preferences) with integral stochastic orders (for example, the various versions of stochastic dominance). Our characterization rests on a novel decision theoretic result that provides a behavioral interpretation of the set of all derivatives of the functional representing the decision maker preferences. As an illustration, we study in some detail the differential properties of prospect theory.