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Expected Uncertain Utility Theory

Author(s): Gul, Faruk R.; Pesendorfer, Wolfgang

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Abstract: We introduce and analyze expected uncertain utility (EUU) theory. A prior and an interval utility characterize an EUU decision maker. The decision maker transforms each uncertain prospect into an interval-valued prospect 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. © 2014 The Econometric Society.
Publication Date: Jan-2014
Citation: Gul, F, Pesendorfer, W. (2014). Expected Uncertain Utility Theory. Econometrica, 82 (1), 1 - 39. doi:10.3982/ECTA9188
DOI: doi:10.3982/ECTA9188
ISSN: 0012-9682
EISSN: 1468-0262
Pages: 1 - 39
Type of Material: Journal Article
Journal/Proceeding Title: Econometrica
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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