Characterizing uncertainty aversion through preference for mixtures

Peter Klibanoff ()
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Peter Klibanoff: Department of Managerial Economics and Decision Sciences, J. L. Kellogg Graduate School of Management, Northwestern University, 2001 Sheridan Rd., Evanston, IL 60208, USA

Social Choice and Welfare, 2001, vol. 18, issue 2, 289-301

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.

Date: 2001-04-17
Note: Received: 20 February 1998/Accepted: 25 March 1999
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