Econometrica: Jan 2014, Volume 82, Issue 1
Expected Uncertain Utility Theory
Faruk Gul, Wolfgang PesendorferWe introduce and analyze () . A prior and an characterize an EUU decision maker. The decision maker transforms each uncertain prospect into an 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.
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