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Characterizing uncertainty aversion through preference for mixtures

Peter Klibanoff
Social Choice and Welfare
Vol. 18, No. 2 (2001), pp. 289-301
Published by: Springer
Stable URL: http://www.jstor.org/stable/41106414
Page Count: 13
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Characterizing uncertainty aversion through preference for mixtures
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Abstract

Uncertainty aversion is often modelled as (strict) quasi-concavity of preferences over uncertain acts. A theory of uncertainty aversion may be characterized by the pairs of acts for which strict preference for a mixture between them is permitted. This paper provides such a characterization for two leading representations of uncertainty averse preferences; those of Schmeidler [24] (Choquet expected utility or CEU) and of Gilboa and Schmeidler [16] (maxmin expected utility with a non-unique prior or MMEU). This characterization clarifies the relation between the two theories.

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