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Characterizing uncertainty aversion through preference for mixtures

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  • Peter Klibanoff

    () (Department of Managerial Economics and Decision Sciences, J. L. Kellogg Graduate School of Management, Northwestern University, 2001 Sheridan Rd., Evanston, IL 60208, USA)

Abstract

Uncertainty aversion is often modelled as (strict) quasi-concavity of preferences over uncertain acts. A theory of uncertainty aversion may be characterized by the pairs of acts for which strict preference for a mixture between them is permitted. This paper provides such a characterization for two leading representations of uncertainty averse preferences; those of Schmeidler [24] (Choquet expected utility or CEU) and of Gilboa and Schmeidler [16] (maxmin expected utility with a non-unique prior or MMEU). This characterization clarifies the relation between the two theories.

Suggested Citation

  • Peter Klibanoff, 2001. "Characterizing uncertainty aversion through preference for mixtures," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 18(2), pages 289-301.
  • Handle: RePEc:spr:sochwe:v:18:y:2001:i:2:p:289-301
    Note: Received: 20 February 1998/Accepted: 25 March 1999
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    Cited by:

    1. Jewitt, Ian & Mukerji, Sujoy, 2017. "Ordering ambiguous acts," Journal of Economic Theory, Elsevier, vol. 171(C), pages 213-267.
    2. Marciano Siniscalchi, 2009. "Vector Expected Utility and Attitudes Toward Variation," Econometrica, Econometric Society, vol. 77(3), pages 801-855, May.
    3. Treich, Nicolas, 2010. "The value of a statistical life under ambiguity aversion," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 15-26, January.
    4. Siniscalchi, Marciano, 2006. "A behavioral characterization of plausible priors," Journal of Economic Theory, Elsevier, vol. 128(1), pages 91-135, May.
    5. Thibault Gajdos & Feriel Kandil, 2008. "The ignorant observer," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 31(2), pages 193-232, August.
    6. Catherine Hafer & Dimitri Landa, 2013. "Issue Advocacy and Mass Political Sophistication," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(1), pages 139-152, March.
    7. Klaus Nehring, 2006. "Decision-Making in the Context of Imprecise Probabilistic Beliefs," Economics Working Papers 0034, Institute for Advanced Study, School of Social Science.
    8. Stoye, Jörg, 2015. "Choice theory when agents can randomize," Journal of Economic Theory, Elsevier, vol. 155(C), pages 131-151.
    9. LANGE Andreas & TREICH Nicolas, 2007. "Uncertainty, Learning and Ambiguity in Economic Models on Climate Policy: Some Classical Results and New Directions," LERNA Working Papers 07.16.237, LERNA, University of Toulouse.
    10. Thibault Gajdos & Feriel Kandil, 2006. "The Ignorant Observer," Post-Print halshs-00115722, HAL.
    11. repec:spr:etbull:v:3:y:2015:i:2:d:10.1007_s40505-014-0059-z is not listed on IDEAS

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