Testing Hurwicz Expected Utility

Han Bleichrodt, Simon Grant and Jingni Yang

Econometrica, 2023, vol. 91, issue 4, 1393-1416

Abstract: Gul and Pesendorfer (2015) propose a promising theory of decision under uncertainty, they dub Hurwicz expected utility (HEU). HEU is a special case of α‐maxmin EU that allows for preferences over sources of uncertainty. It is consistent with most of the available empirical evidence on decision under risk and uncertainty. We show that HEU is also tractable and can readily be measured and tested. We do this by deriving a new two‐parameter functional form for the probability weighting function, which fits our data well and which offers a clean separation between ambiguity perception and ambiguity aversion. In two experiments, we find support for HEU's predictions that ambiguity aversion is constant across sources of uncertainty and that ambiguity aversion and first order risk aversion are positively correlated.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.3982/ECTA19221

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:wly:emetrp:v:91:y:2023:i:4:p:1393-1416

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido W. Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().