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Comparing uncertainty aversion towards different sources

Author

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  • Aurélien Baillon

    (Erasmus University Rotterdam)

  • Ning Liu

    (Bocconi University)

  • Dennie Dolder

    (University of Nottingham)

Abstract

We propose simple behavioral definitions of comparative uncertainty aversion for a single agent towards different sources of uncertainty. Our definitions allow for the comparison of utility curvature for different sources if the agent’s choices satisfy subjective expected utility towards each source. We discuss how our definitions can be applied to investigate ambiguity aversion in Klibanoff et al.’s (Econometrica 73(6):1849–1892, 2005) smooth ambiguity model, to study the effects of learning and situational factors on uncertainty preferences, and to compare uncertainty preferences between different agents.

Suggested Citation

  • Aurélien Baillon & Ning Liu & Dennie Dolder, 2017. "Comparing uncertainty aversion towards different sources," Theory and Decision, Springer, vol. 83(1), pages 1-18, June.
    • Handle: RePEc:kap:theord:v:83:y:2017:i:1:d:10.1007_s11238-016-9584-6
    DOI: 10.1007/s11238-016-9584-6
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    2. Andrea C. Hupman & Jay Simon, 2023. "The Legacy of Peter Fishburn: Foundational Work and Lasting Impact," Decision Analysis, INFORMS, vol. 20(1), pages 1-15, March.
    3. He, Ying, 2024. "Recursive two-stage evaluation model for dynamic decision making under ambiguity," Journal of Mathematical Economics, Elsevier, vol. 113(C).

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    More about this item

    Keywords

    Source-preferences; Uncertainty; Subjective expected utility; Smooth ambiguity model;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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