A Non‐Bayesian Theory of State‐Dependent Utility

Brian Hill

Econometrica, 2019, vol. 87, issue 4, 1341-1366

Abstract: Many decision situations involve two or more of the following divergences from subjective expected utility: imprecision of beliefs (or ambiguity), imprecision of tastes (or multi‐utility), and state dependence of utility. This paper proposes and characterizes a model of uncertainty averse preferences that can simultaneously incorporate all three phenomena. The representation supports a principled separation of (imprecise) beliefs and (potentially state‐dependent, imprecise) tastes. Moreover, the representation permits comparative statics separating the roles of beliefs and tastes, and is modular: it easily delivers special cases involving various combinations of the phenomena, as well as state‐dependent multi‐utility generalizations covering popular ambiguity models.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:wly:emetrp:v:87:y:2019:i:4:p:1341-1366

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