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A Bayesian Approach to Uncentainty Aversion

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  • 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.)
(This abstract was borrowed from another version of this item.)

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  • Yoram Halevy & Vincent Feltkamp, "undated". "A Bayesian Approach to Uncentainty Aversion," CARESS Working Papres 99-03, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    • Handle: RePEc:wop:pennca:99-03
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    File URL: http://www.ssc.upenn.edu/econ/CARESS/CARESSpdf/99-03.pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

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

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