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Uncertainty Aversion, Multi Utility Representations and State Independence of Utility

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  • Hill, Brian

Abstract

This paper proposes and characterises a model of uncertainty averse preferences that can simultaneously accommodate three divergences from subjective expected utility: imprecision of beliefs (or ambiguity), imprecision of tastes (or multi utility), and state dependence of utility. Moreover, it characterises, in this context, a notion of state independence of utility borrowed from the literature on incomplete preferences. This notion is then shown to be basically inconsistent with the standard state-independence axiom, monotonicity, whenever tastes are imprecise. A new notion of state independence in the context of imprecise tastes, which is characterised by monotonicity, is proposed.

Suggested Citation

  • Hill, Brian, 2015. "Uncertainty Aversion, Multi Utility Representations and State Independence of Utility," HEC Research Papers Series 1079, HEC Paris.
    • Handle: RePEc:ebg:heccah:1079
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    Keywords

    State independence of utility; imprecise tastes; uncertainty aversion; multi utility; multiple priors; state-dependent utility;
    All these keywords.

    JEL classification:

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

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