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A Bayesian Approach to Uncentainty Aversion

Author

Listed:
  • Yoram Halevy
  • Vincent Feltkamp

Abstract

The Ellsberg Paradox demonstrates that people's belief over uncertain events might not be representable by subjective probability. We show that if a risk averse decision maker, who has a well defined Bayesian prior, perceives an Ellsberg type decision problem as possibly composed of a bundle of several positively correlated problems - she will be uncertainty averse. We generalize this argument and derive sufficient conditions for uncertainty aversion.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Yoram Halevy & Vincent Feltkamp, "undated". "A Bayesian Approach to Uncentainty Aversion," Penn CARESS Working Papers f17f3e2c6ad93e4b53fd58fc9, Penn Economics Department.
    • Handle: RePEc:cla:penntw:f17f3e2c6ad93e4b53fd58fc9b88a886
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    File URL: http://www.econ.upenn.edu/Centers/CARESS/
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    JEL classification:

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

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