Les Cahiers de Recherche - HEC Paris
Uncertainty Aversion, Multi Utility Representations and State Independence of Utility
Abstract: This paper proposes and characterises a model of
uncertainty averse preferences that can simultaneously accommodate three
divergences from subjective expected utility: imprecision of beliefs (or
ambiguity), imprecision of tastes (or multi utility), and state dependence
of utility. Moreover, it characterises, in this context, a notion of state
independence of utility borrowed from the literature on incomplete
preferences. This notion is then shown to be basically inconsistent with
the standard state-independence axiom, monotonicity, whenever tastes are
imprecise. A new notion of state independence in the context of imprecise
tastes, which is characterised by monotonicity, is proposed.
Keywords: State independence of utility; imprecise tastes; uncertainty aversion; multi utility; multiple priors; state-dependent utility; (follow links to similar papers)
JEL-Codes: D81; (follow links to similar papers)
42 pages, January 22, 2015
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