Axiomatic Foundations of Multiplier Preferences


  • Tomasz Strzalecki

    1. Dept. of Economics, Harvard University, Littauer Center, 1805 Cambridge Street, Cambridge, MA 02138, U.S.A.;
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    • I am indebted to my advisor, Eddie Dekel, for his continuous guidance, support, and encouragement. I am grateful to Peter Klibanoff and Marciano Siniscalchi for many discussions which resulted in significant improvements of the paper. I would also like to thank Jeff Ely, Todd Sarver, and seminar audiences at Berkeley, Bocconi, CEMFI, Chicago, Collegio Carlo Alberto, Columbia, Duke (Fuqua), Harvard, Hebrew University, LSE, NYU (Econ and Stern), Northwestern, Penn, Princeton, Stanford (Econ and GSB), UCL, University of Iowa, University of Minnesota, Warwick, Washington University (Econ and Olin), Yale, and the Hansen–Sargent conference for graduate students. This project started after a very stimulating conversation with Tom Sargent and was further shaped by conversations with Lars Hansen. I am very grateful to the co-editor and three anonymous referees for their insightful and helpful comments. All errors are my own.


This paper axiomatizes the robust control criterion of multiplier preferences introduced by Hansen and Sargent (2001). The axiomatization relates multiplier preferences to other classes of preferences studied in decision theory, in particular, the variational preferences recently introduced by Maccheroni, Marinacci, and Rustichini (2006a). This paper also establishes a link between the parameters of the multiplier criterion and the observable behavior of the agent. This link enables measurement of the parameters on the basis of observable choice data and provides a useful tool for applications.