Source and Rank-dependent Utility

Mohammed Abdellaoui () and Horst Zank ()
Additional contact information
Mohammed Abdellaoui: HEC Paris - Ecole des Hautes Etudes Commerciales, GREGHEC - Groupement de Recherche et d'Etudes en Gestion - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique
Horst Zank: University of Manchester [Manchester]

Post-Print from HAL

Abstract: Foundations are provided for rank-dependent preferences within the popular twostage framework of Anscombe-Aumann, in which risk and ambiguity feature as distinct sources of uncertainty. We advance the study of attitudes towards ambiguity without imposing expected utility for risk. As a result, in our general model, ambiguity attitude can be captured by non-additive subjective probabilities as under Choquet expected utility or by a specific utility for ambiguity as in recursive expected utility or, if required, by both. The key property for preferences builds on (discrete) rates of substitution which are standardly applied in economics. By demanding consistency for these rates of substitution across events and within or across sources of uncertainty, we obtain a model that nests popular theories for risk and ambiguity. This way, new possibilities for theoretical and empirical analyses of these theories emerge.

Keywords: Ambiguity; Recursive Expected Utility; Risk; Substitution Consistency; Source-dependence; Source and Rank-dependent Utility (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-dcm and nep-upt
Note: View the original document on HAL open archive server: https://hal.science/hal-03924295
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Economic Theory, 2022, ⟨10.1007/s00199-022-01434-4⟩

Downloads: (external link)
https://hal.science/hal-03924295/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03924295

DOI: 10.1007/s00199-022-01434-4

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().