Uncertainty Aversion, Multi Utility Representations and State Independence of Utility

Brian Hill (1)

1 GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC

This paper proposes and characterises a model of uncertainty averse preferences that can simultaneously accommodate three divergences from subjective expected utility: imprecision of beliefs (or ambiguity), imprecision of tastes (or multi utility), and state dependence of utility. Moreover, it characterises, in this context, a notion of state independence of utility borrowed from the literature on incomplete preferences. This notion is then shown to be basically inconsistent with the standard state-independence axiom, monotonicity, whenever tastes are imprecise. A new notion of state independence in the context of imprecise tastes, which is characterised by monotonicity, is proposed.

Keywords: State independence of utility; imprecise tastes; uncertainty aversion; multi utility; multiple priors; state-dependent utility.

Domains: Business administration

Brian Hill. Uncertainty Aversion, Multi Utility Representations and State Independence of Utility. 2015. ⟨hal-02011408⟩