Econometrica Vol. 87 No. 4 2019
A Non‐Bayesian Theory of State‐Dependent Utility
Abstract
Many decision situations involve two or more of the following divergences from subjective expected utility: imprecision of beliefs (or ambiguity), imprecision of tastes (or multi‐utility), and state dependence of utility. This paper proposes and characterizes a model of uncertainty averse preferences that can simultaneously incorporate all three phenomena. The representation supports a principled separation of (imprecise) beliefs and (potentially state‐dependent, imprecise) tastes. Moreover, the representation permits comparative statics separating the roles of beliefs and tastes, and is modular: it easily delivers special cases involving various combinations of the phenomena, as well as state‐dependent multi‐utility generalizations covering popular ambiguity models.
- DOI
- 10.3982/ecta15916
- Volume
- 87
- Issue
- 4
- Pages
- 1341-1366
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref