A Model-Free Definition of Increasing Uncertainty

S. Grant, J. Quiggin

Research output: Working paper › Discussion paper › Other research output

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Abstract

We present a definition of increasing uncertainty, independent of any notion of subjective probabilities, or of any particular model of preferences.Our notion of an elementary increase in the uncertainty of any act corresponds to the addition of an 'elementary bet' which increases consumption by a fixed amount in the (relatively) 'good' states and decreases consumption by a fixed (and possibly different) amount in the (relatively) 'bad' states.This definition naturally gives rise to a dual definition of comparative aversion to uncertainty.We characterize this definition for a popular class of generalized models of choice under uncertainty.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages29
Volume2001-84
Publication statusPublished - 2001

Publication series

NameCentER Discussion Paper
Volume2001-84

Fingerprint

Uncertainty
Subjective probability
Choice under uncertainty

Keywords

  • uncertainty
  • risk
  • non expected utility theory

Cite this

Grant, S., & Quiggin, J. (2001). A Model-Free Definition of Increasing Uncertainty. (CentER Discussion Paper; Vol. 2001-84). Tilburg: Microeconomics.
Grant, S. ; Quiggin, J. / A Model-Free Definition of Increasing Uncertainty. Tilburg : Microeconomics, 2001. (CentER Discussion Paper).
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Grant, S & Quiggin, J 2001 'A Model-Free Definition of Increasing Uncertainty' CentER Discussion Paper, vol. 2001-84, Microeconomics, Tilburg.

A Model-Free Definition of Increasing Uncertainty. / Grant, S.; Quiggin, J.

Tilburg : Microeconomics, 2001. (CentER Discussion Paper; Vol. 2001-84).

Research output: Working paper › Discussion paper › Other research output

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N2 - We present a definition of increasing uncertainty, independent of any notion of subjective probabilities, or of any particular model of preferences.Our notion of an elementary increase in the uncertainty of any act corresponds to the addition of an 'elementary bet' which increases consumption by a fixed amount in the (relatively) 'good' states and decreases consumption by a fixed (and possibly different) amount in the (relatively) 'bad' states.This definition naturally gives rise to a dual definition of comparative aversion to uncertainty.We characterize this definition for a popular class of generalized models of choice under uncertainty.

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Grant S, Quiggin J. A Model-Free Definition of Increasing Uncertainty. Tilburg: Microeconomics. 2001. (CentER Discussion Paper).

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