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.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Subjective probability