This paper presents a general technique for comparing the concavity of different utility functions when probabilities need not be known. It generalizes: (a) Yaari's comparisons of risk aversion by not requiring identical beliefs; (b) Kreps and Porteus' information-timing preference by not requiring known probabilities; (c) Klibanoff, Marinacci, and Mukerji's smooth ambiguity aversion by not using subjective probabilities (which are not directly observable) and by not committing to (violations of) dynamic decision principles; (d) comparative smooth ambiguity aversion by not requiring identical second-order subjective probabilities. Our technique completely isolates the empirical meaning of utility. It thus sheds new light on the descriptive appropriateness of utility to model risk and ambiguity attitudes.

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Games and Economic Behavior
Erasmus Research Institute of Management

Baillon, A, Driesen, B, & Wakker, P.P. (2012). Relative concave utility for risk and ambiguity. Games and Economic Behavior, 75(2), 481–489. doi:10.1016/j.geb.2012.01.006