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Probabilistic Sophistication, Second Order Stochastic Dominance, and Uncertainty Aversion

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  • Simone Cerreia-Vioglio
  • Fabio Maccheroni
  • Massimo Marinacci
  • Luigi Montrucchio

Abstract

We study the interplay of probabilistic sophistication, second order stochastic dominance, and uncertainty aversion, three fundamental notions in choice under uncertainty. In particular, our main result, Theorem 2, characterizes uncertainty averse preferences that satisfy second order stochastic dominance, as well as uncertainty averse preferences that are probabilistically sophisticated.

Suggested Citation

  • Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2010. "Probabilistic Sophistication, Second Order Stochastic Dominance, and Uncertainty Aversion," Carlo Alberto Notebooks 174, Collegio Carlo Alberto.
  • Handle: RePEc:cca:wpaper:174
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    References listed on IDEAS

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    Cited by:

    1. Cerreia-Vioglio, Simone & Maccheroni, Fabio & Marinacci, Massimo & Montrucchio, Luigi, 2013. "Ambiguity and robust statistics," Journal of Economic Theory, Elsevier, vol. 148(3), pages 974-1049.
      • Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2011. "Ambiguity and Robust Statistics," Working Papers 382, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    2. Tomasz, Strzalecki, 2011. "Probabilistic sophistication and variational preferences," Journal of Economic Theory, Elsevier, vol. 146(5), pages 2117-2125, September.
    3. Faro, José Heleno, 2015. "Variational Bewley preferences," Journal of Economic Theory, Elsevier, vol. 157(C), pages 699-729.
    4. repec:kap:jrisku:v:54:y:2017:i:3:d:10.1007_s11166-017-9260-4 is not listed on IDEAS

    More about this item

    Keywords

    Probabilistic Sophistication; Second Order Stochastic Dominance; Uncertainty Aversion; Unambiguous Events; Subjective Expected Utility;

    JEL classification:

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

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