Capturing preferences for inequality aversion in decision support

Özlem Karsu, Alec Morton, Nikos Argyris

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

We investigate the situation where there is interest in ranking distributions (of income, of wealth, of health, of service levels) across a population, in which individuals are considered preferentially indistinguishable and where there is some limited information about social pref- erences. We use a natural dominance relation, generalized Lorenz dominance, used in welfare comparisons in economic theory. In some settings there may be additional information about preferences (for example, if there is policy statement that one distribution is preferred to an- other) and any dominance relation should respect such preferences. However, characterising this sort of conditional dominance relation (specifically, dominance with respect to the set of all symmetric increasing quasiconcave functions in line with given preference information) turns out to be computationally challenging. This challenge comes about because, through the as- sumption of symmetry, any one preference statement (“I prefer giving $100 to Jane and $110 to John over giving $150 to Jane and $90 to John”) implies a large number of other preference statements (“I prefer giving $110 to Jane and $100 to John over giving $150 to Jane and $90 to John”; “I prefer giving $100 to Jane and $110 to John over giving $90 to Jane and $150 to John”). We present theoretical results that help deal with these challenges and present tractable linear programming formulations for testing whether dominance holds between any given pair of distributions. We also propose an interactive decision support procedure for ranking a given set of distributions and demonstrate its performance through computational testing.
LanguageEnglish
Pages686-706
Number of pages21
JournalEuropean Journal of Operational Research
Volume264
Issue number2
Early online date10 Jul 2017
DOIs
Publication statusPublished - 16 Jan 2018

Fingerprint

Decision Support
Dominance Relation
Testing
Linear programming
Ranking
Health
Economics
Service Levels
Increasing Functions
Symmetric Functions
Welfare
Sort
Symmetry
Imply
Inequality aversion
Decision support
Formulation
Line
Demonstrate

Keywords

  • multiple criteria analysis
  • quitable preferences
  • generalized Lorenz dominance
  • conditional dominance
  • interactive approaches

Cite this

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Capturing preferences for inequality aversion in decision support. / Karsu, Özlem; Morton, Alec; Argyris, Nikos.

In: European Journal of Operational Research, Vol. 264, No. 2, 16.01.2018, p. 686-706 .

Research output: Contribution to journalArticle

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