Comparing uncertainty aversion towards different sources

• DOI: 10.1007/s11238-016-9584-6
• Publication Date: 2016-12-20T04:11:15Z
• Authors: Aurélien Baillon; Ning Liu; Dennie van Dolder
• Keywords: Smooth ambiguity model; Decision Sciences(all); Subjective expected utility; Source-preferences; 0502 economics and business; 05 social sciences; Uncertainty; Social Sciences(all); Economics, Econometrics and Finance(all); Applied Psychology; Computer Science Applications

We propose simple behavioral definitions of comparative uncertainty aversion for a single agent towards different sources of uncertainty. Our definitions allow for the comparison of utility curvature for different sources if the agent’s choices satisfy subjective expected utility towards each source. We discuss how our definitions can be applied to investigate ambiguity aversion in Klibanoff et al.’s (Econometrica 73(6):1849–1892, 2005) smooth ambiguity model, to study the effects of learning and situational factors on uncertainty preferences, and to compare uncertainty preferences between different agents.