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A Definition of Uncertainty Aversion

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  • Larry G. Epstein

Abstract

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.

Suggested Citation

  • Larry G. Epstein, 1999. "A Definition of Uncertainty Aversion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(3), pages 579-608.
    • Handle: RePEc:oup:restud:v:66:y:1999:i:3:p:579-608.
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00099
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