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A belief-based definition of ambiguity aversion

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  • Xiangyu Qu

Abstract

This paper proposes a notion of ambiguity aversion and characterizes it in the context of biseparable preferences, which include many popular ambiguity models in the literature. The defined properties suggest that ambiguity aversion is characterized by the properties of its capacity. This formalizes a sharp distinction between ambiguity and risk aversion, where risk aversion is characterized by the properties of its utility index and its probability weighting function. Copyright Springer Science+Business Media New York 2015

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  • Xiangyu Qu, 2015. "A belief-based definition of ambiguity aversion," Theory and Decision, Springer, vol. 79(1), pages 15-30, July.
    • Handle: RePEc:kap:theord:v:79:y:2015:i:1:p:15-30
    DOI: 10.1007/s11238-014-9452-1
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    Cited by:

    1. Pavlo Blavatskyy, 2024. "Who is ambiguity neutral?," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 49(2), pages 181-193, September.
    2. Kellerer, Belinda, 2019. "Portfolio Optimization and Ambiguity Aversion," Junior Management Science (JUMS), Junior Management Science e. V., vol. 4(3), pages 305-338.

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    More about this item

    Keywords

    Ambiguity aversion; Biseparable preference; Maxmin expected utility; Choquet expected utility; D80; D81;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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