A Definition of Uncertainty Aversion

A Definition of Uncertainty Aversion

A definition of uncertainty or ambiguity aversion is proposed. It is argued that the definition is well-suited to modelling within the Savage (as opposed to Anscombe and Aumann) domain of acts. The defined property of uncertainty aversion has intuitive empirical content, behaves well in specific mod...

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Veröffentlicht in:The Review of economic studies 1999-07, Vol.66 (3), p.579-608
1. Verfasser: Epstein, Larry G.
Format: Artikel
Sprache:eng
Schlagworte:
Algebra
Ambiguity
Betting
Convexity
Economic theory
Economic uncertainty
Expected utility
Lotteries
Risk aversion
Utility functions
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Zusammenfassung:A definition of uncertainty or ambiguity aversion is proposed. It is argued that the definition is well-suited to modelling within the Savage (as opposed to Anscombe and Aumann) domain of acts. The defined property of uncertainty aversion has intuitive empirical content, behaves well in specific models of preference (multiple-priors and Choquet expected utility) and is tractable. Tractability is established through use of a novel notion of differentiability for utility functions, called eventwise differentiability.
ISSN:0034-6527
1467-937X
DOI:10.1111/1467-937X.00099