A Bayesian Approach to Uncertainty Aversion

Vincent Feltkamp and Yoram Halevy

Microeconomics.ca working papers from Vancouver School of Economics

Abstract: The Ellsberg Paradox demonstrates that people's belief over uncertain events might not be representable by subjective probability. We show that if a risk averse decision maker, who has a well defined Bayesian prior, perceives an Ellsberg type decision problem as possibly composed of a bundle of several positively correlated problems - she will be uncertainty averse. We generalize this argument and derive sufficient conditions for uncertainty aversion.

Keywords: Ellsberg Paradox; rule rationality; ambiguity aversion; risk aversionm subjective probability; reduction of compound lotteries (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 0 pages
Date: 2004-02-13, Revised 2014-02-25
New Economics Papers: this item is included in nep-mic and nep-rmg
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Related works:
Journal Article: A Bayesian Approach to Uncertainty Aversion (2005)
Working Paper: A Bayesian Approach to Uncertainty Aversion (2000)
Working Paper: - A BAYESIAN APPROACH TO UNCERTAINTY AVERSION (1999)
Working Paper: A Bayesian Approach to Uncentainty Aversion
Working Paper: A Bayesian Approach to Uncentainty Aversion
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Persistent link: https://EconPapers.repec.org/RePEc:ubc:pmicro:halevy-04-02-13-07-48-37

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