A Characterization of Risk-Neutral and Ambiguity-Averse Behavior

Gerasimou, Georgios (2015): A Characterization of Risk-Neutral and Ambiguity-Averse Behavior.

Abstract

This paper studies a decision maker who chooses monetary bets/investment portfolios under pure uncertainty. Necessary and sufficient conditions on his preferences over these objects are provided for his choice behavior to be guided by the *maxmin expected value* rule, and therefore to exhibit both ``risk neutrality'' and ambiguity aversion. This result is obtained as an extension of a simple re-characterization of de Finetti's theorem on maximization of subjective expected value.

• Item Type: MPRA Paper
• Language: English
• Keywords: Maxmin expected value; ambiguity aversion; risk neutrality; multiple priors; de Finetti.
• Subjects: D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles; D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles; D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory

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