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Probabilistic Sophistication, Second Order Stochastic Dominance, and Uncertainty Aversion

Simone Cerreia-Vioglio, Fabio Maccheroni, Massimo Marinacci and Luigi Montrucchio

No 174, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: We study the interplay of probabilistic sophistication, second order stochastic dominance, and uncertainty aversion, three fundamental notions in choice under uncertainty. In particular, our main result, Theorem 2, characterizes uncertainty averse preferences that satisfy second order stochastic dominance, as well as uncertainty averse preferences that are probabilistically sophisticated.

Keywords: Probabilistic Sophistication; Second Order Stochastic Dominance; Uncertainty Aversion; Unambiguous Events; Subjective Expected Utility (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2010
New Economics Papers: this item is included in nep-ore and nep-upt
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Journal Article: Probabilistic sophistication, second order stochastic dominance and uncertainty aversion (2012) Downloads
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