Relative concave utility for risk and ambiguity
This paper presents a general technique for comparing the concavity of different utility functions when probabilities need not be known. It generalizes: (a) Yaariʼs comparisons of risk aversion by not requiring identical beliefs; (b) Kreps and Porteusʼ information-timing preference by not requiring...
Saved in:
| Main Authors: | , , |
|---|---|
| Format: | Article (Journal) |
| Language: | English |
| Published: |
23 February 2012
|
| In: |
Games and economic behavior
Year: 2012, Volume: 75, Issue: 2, Pages: 481-489 |
| ISSN: | 1090-2473 |
| DOI: | 10.1016/j.geb.2012.01.006 |
| Online Access: | Verlag, Volltext: http://dx.doi.org/10.1016/j.geb.2012.01.006 Verlag, Volltext: http://www.sciencedirect.com/science/article/pii/S0899825612000097 
|
| Author Notes: | Aurélien Baillon, Bram Driesen, Peter P. Wakker |
| Summary: | This paper presents a general technique for comparing the concavity of different utility functions when probabilities need not be known. It generalizes: (a) Yaariʼs comparisons of risk aversion by not requiring identical beliefs; (b) Kreps and Porteusʼ information-timing preference by not requiring known probabilities; (c) Klibanoff, Marinacci, and Mukerjiʼs smooth ambiguity aversion by not using subjective probabilities (which are not directly observable) and by not committing to (violations of) dynamic decision principles; (d) comparative smooth ambiguity aversion by not requiring identical second-order subjective probabilities. Our technique completely isolates the empirical meaning of utility. It thus sheds new light on the descriptive appropriateness of utility to model risk and ambiguity attitudes. |
|---|---|
| Item Description: | Received 7 August 2010, available online 23 February 2012 Gesehen am 15.08.2018 |
| Physical Description: | Online Resource |
| ISSN: | 1090-2473 |
| DOI: | 10.1016/j.geb.2012.01.006 |