Living with risk can lead to anticipatory feelings such as anxiety or hopefulness. Such feelings can affect the choice between lotteries that will be played out in the future—choice may be motivated not only by the (static) risks involved but also by the desire to reduce anxiety or to promote savouring. This paper provides a model of preference in a three-period setting that is axiomatic and includes a role for anticipatory feelings. It is shown that the model of preference can accommodate intuitive patterns of demand for information such as information seeking when a favourable outcome is very likely and information aversion when it is more likely that the outcome will be unfavourable. Behavioural meaning is given to statements such as “individual 1 is anxious” and “2 is more anxious than 1”. Finally, the model is differentiated sharply from the classic model due to Kreps and Porteus.

This paper models an agent in a three-period setting who does not update according to Bayes' Rule and who is self-aware and anticipates her updating behaviour when formulating plans. Gul and Pesendorfer's theory of temptation and self-control is a key building block. The main result is a representation theorem that generalizes (the dynamic version of) Anscombe-Aumann's theorem so that both the prior and the way in which it is updated are subjective. The model can accommodate updating biases analogous to those observed by psychologists.

A definition of uncertainty or ambiguity aversion is proposed. It is argued that the definition is well-suited to modelling within the Savage (as opposed to Anscombe and Aumann) domain of acts. The defined property of uncertainty aversion has intuitive empirical content, behaves well in specific models of preference (multiple-priors and Choquet expected utility) and is tractable. Tractability is established through use of a novel notion of differentiability for utility functions, called eventwise differentiability.

The problem of integrating back from an incomplete set of demand functions to a utility function is considered. Conditions permitting local integrability are analogous to those which arise in local integrability theorems for complete systems. But the analysis of the global integrability of incomplete systems differs markedly from that of complete systems.

Journal Article Duality Theory and Functional Forms for Dynamic Factor Demands Get access Larry G. Epstein Larry G. Epstein University of Toronto Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 48, Issue 1, January 1981, Pages 81–95, https://doi.org/10.2307/2297122 Published: 01 January 1981 Article history Received: 01 July 1979 Accepted: 01 August 1980 Published: 01 January 1981

Two Ellsberg-style thought experiments are described that reflect on the smooth ambiguity decision model developed by Klibanoff, Marinacci, and Mukerji (2005). The first experiment poses difficulties for the model's axiomatic foundations and, as a result, also for its interpretation, particularly for the claim that the model achieves a separation between ambiguity and the attitude toward ambiguity. Given the problematic nature of its foundations, the behavioral content of the model and how it differs from multiple priors, for example, are not clear. The second thought experiment casts some light on these questions.

This paper describes a continuous time model of an economy with finitely many infinitely-lived consumers and a finite number of capital goods. Two objectives are achieved. First, recursive (nonadditive) utility functionals are formulated and analyzed. Second, these preference functionals are applied to analyze the nature of efficient allocations in a dynamic economy. Two classes of global turnpike propositions are proven which provide the basis for a model of the long-run distribution of wealth. These propositions also provide new perspective regarding existing stability literature based on additive utilities.

On formule un ensemble de postulats d'aversion pour le risque absolu decroissant et on montre que seules les fonctionnelles d'utilite moyenne-variance peuvent les satisfaire

[The theory of duality has been an extremely useful tool in the analysis of the standard models of consumer and producer behavior. This paper describes an extension of the theory to a wider class of problems of static optimization. The generalized duality theory is then applied to the integrability question in fairly general optimization models. A major gap in the comparative statics of optimization models is partially closed.]

The comparative static effects of increased uncertainty in standard two-period models of consumer and producer behavior under uncertainty have been shown in [10 and 11] to be complex. Two principal objectives of this paper are: (i) to describe some assumptions, forms of risk independence, about preferences and technologies, that simplify the behavioral effects of increased variability; and (ii) to characterize the preferences and technologies that are consistent with risk independence. The theory of duality plays an important part in the analysis.