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Handbook of the Economics of Risk and Uncertainty
book

Handbook of the Economics of Risk and Uncertainty

by Mark Machina, W. Kip Viscusi
November 2013
Beginner content levelBeginner
896 pages
35h 10m
English
North Holland
Content preview from Handbook of the Economics of Risk and Uncertainty
Ambiguity and Ambiguity Aversion
787
second-order utility ϕ(·) is concave if and only if the individual is smooth ambiguity averse,
in the sense that for every support K with associated second-order measure M, and for
every act f, the individual prefers the prize x
f
(M) to f — formally, x
f
(M)
K
f. A similar
construction can be used to characterize comparative smooth ambiguity aversion.
It should be noted that, due to the way x
f
(M) is defined, smooth ambiguity aversion
depends crucially on the representation of second-order preferences. Thus, the qualifica-
tions on second-order preferences, and on the interpretation of the smooth representa ...
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Publisher Resources

ISBN: 9780444536853