Mean-dispersion preferences and constant absolute uncertainty aversion

A-Tier
Journal: Journal of Economic Theory
Year: 2013
Volume: 148
Issue: 4
Pages: 1361-1398

Authors (2)

Score contribution per author:

2.011 = (α=2.01 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We axiomatize, in an Anscombe–Aumann framework, the class of preferences that admit a representation of the form V(f)=μ−ρ(d), where μ is the mean utility of the act f with respect to a given probability, d is the vector of state-by-state utility deviations from the mean, and ρ(d) is a measure of (aversion to) dispersion that corresponds to an uncertainty premium. The key feature of these mean-dispersion preferences is that they exhibit constant absolute uncertainty aversion. This class includes many well-known models of preferences from the literature on ambiguity. We show what properties of the dispersion function ρ(⋅) correspond to known models, to probabilistic sophistication, and to some new notions of uncertainty aversion.

Technical Details

RePEc Handle
repec:eee:jetheo:v:148:y:2013:i:4:p:1361-1398
Journal Field
Theory
Author Count
2
Added to Database
2026-01-25