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 informationtiming 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 secondorder 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.
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Volume (Year): 75 (2012)
Issue (Month): 2 ()
Pages: 481489
Handle:  RePEc:eee:gamebe:v:75:y:2012:i:2:p:481489 
DOI:  10.1016/j.geb.2012.01.006 
Contact details of provider:  Web page: http://www.elsevier.com/locate/inca/622836

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