Expected Uncertain Utility Theory
Faruk Gul, Wolfgang Pesendorfer
Econometrica · 2014 · Volume 82 · Issue 1
Abstract
We introduce and analyzeexpected uncertain utility(EUU)theory. A prior and aninterval utilitycharacterize an EUU decision maker. The decision maker transforms each uncertain prospect into aninterval-valuedprospect that assigns an interval of prizes to each state. She then ranks prospects according to their expected interval utilities. We define uncertainty aversion for EUU, use the EUU model to address the Ellsberg Paradox and other ambiguity evidence, and relate EUU theory to existing models.
Keywords
Ambiguity, Ellsberg, subjective probability
Enable JavaScript for citation tools and additional paper interactions.