State Dependent Utility and Ambiguity

Lasse Mononen
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Lasse Mononen: Center for Mathematical Economics, Bielefeld University

No 738, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: Models of choice under uncertainty study choice behavior when outcomes depend on the realized state of the world. The typical assumption is that utilities of outcomes do not depend on the realized state and are state independent. Without this simplifying assumption, it is difficult to separately identify utilities and beliefs. This paper provides novel general foundations for models with state dependent utilities: once we depart from expected utility, it is often possible to uniquely identify utilities and beliefs. Specifically, we show that with general models of non-expected utility under ambiguity we have complete identification of utilities and probabilities under full-dimensional uncertainty. Additionally, we offer novel axiomatizations for state dependent dual-self variational expected utility and dual-self expected utility.

Keywords: State dependent utility; belief identification; ambiguity; multiple priors; dual-self expected utility (search for similar items in EconPapers)
Pages: 61
Date: 2025-08-15
New Economics Papers: this item is included in nep-dcm, nep-mic and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:738

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