Intertemporal utility smoothing under uncertainty

Katsutoshi Wakai

Theory and Decision, 2013, vol. 74, issue 2, 285-310

Abstract: This paper axiomatizes a recursive utility model that captures both intertemporal utility smoothing defined across time and ambiguity aversion defined over states. The resulting representation adapts Wakai (Econometrica 76:137–153, 2008 ) model of intertemporal utility smoothing as an aggregator function, where the utility of the certainty equivalent of future uncertainty is computed by Gilboa and Schmeidler (J Math Econ 18:141–153, 1989 ) multiple-priors utility. The model also permits the separation of intertemporal utility smoothing from ambiguity aversion. Copyright Springer Science+Business Media New York 2013

Keywords: Ambiguity aversion; Discount factors; Gain/loss asymmetry; Recursive utility; Utility smoothing; D81; D90 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/s11238-012-9304-9

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