Econometrica: May 2009, Volume 77, Issue 3
Vector Expected Utility and Attitudes Toward Variation
https://doi.org/10.3982/ECTA7564
p.
801-855
Marciano Siniscalchi
This paper proposes a model of decision under ambiguity deemed , or VEU. In this model, an uncertain prospect, or Savage act, is assessed according to (a) a , and (b) an that reflects the individual's perception of ambiguity and her attitudes toward it. The adjustment is itself a function of the act's exposure to distinct sources of ambiguity, as well as its variability. The key elements of the VEU model are a baseline probability and a collection of random variables, or , which represent acts exposed to distinct ambiguity sources and also reflect complementarities among ambiguous events. The adjustment to the baseline expectedâutility evaluation of an act is a function of the covariance of its utility profile with each adjustment factor, which reflects exposure to the corresponding ambiguity source.Log In To View Full Content