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Risk, Ambiguity, and the Separation of Utility and Beliefs

Ghirardato, Paolo and Marinacci, Massimo (2000) Risk, Ambiguity, and the Separation of Utility and Beliefs. Social Science Working Paper, 1085. California Institute of Technology , Pasadena, CA. (Unpublished)

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We introduce and characterize axiomatically a general model of static choice under uncertainty, which is possibly the weakest model in which a separation of cardinal utility and a representation of beliefs is achieved. Most of the popular non-expected utility models in the literature are special cases of it. To prove its usefulness, we show that the model can be used to generalize several well-known results on the characterization of risk aversion. Elsewhere, we have shown that it can be fruitfully applied to the problem of characterizing a notion of ambiguity aversion, as the separation of utility and beliefs that we achieve can be used to identify and remove aspects of risk attitude from the decision maker’s behavior.

Item Type:Report or Paper (Working Paper)
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Additional Information:We are grateful to Kim Border, Peter Wakker and especially Fabio Maccheroni for helpful comments and discussion. This paper was mostly written while Marinacci was with the Università di Bologna. Marinacci gratefully acknowledges the financial support of MURST. Published as Ghirardato, P., & Marinacci, M. (2001). Risk, ambiguity, and the separation of utility and beliefs. Mathematics of operations research, 26(4), 864-890.
Group:Social Science Working Papers
Funding AgencyGrant Number
Ministero dell’Università e della Ricerca Scientifico-Tecnologica (MURST)Cofin2000
Subject Keywords:Risk Aversion, Ambiguity Aversion, Biseparable Preferences, Choquet Expected Utility, Maxmin Expected Utility, Probabilistic Beliefs
Series Name:Social Science Working Paper
Issue or Number:1085
Classification Code:JEL: D81
Record Number:CaltechAUTHORS:20170808-154249780
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79973
Deposited By: Jacquelyn Bussone
Deposited On:09 Aug 2017 18:00
Last Modified:03 Oct 2019 18:26

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