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Time and No Lotteries: An Axiomatization of Maxmin Expected Utility
Author(s) -
Kochov Asen
Publication year - 2015
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta10886
Subject(s) - axiom , ambiguity , expected utility hypothesis , mathematical economics , consumption (sociology) , economics , ambiguity aversion , smoothing , econometrics , computer science , mathematics , social science , geometry , sociology , computer vision , programming language
This paper axiomatizes an intertemporal version of the maxmin expected‐utility model. It employs two axioms specific to a dynamic setting. The first requires that smoothing consumption across states of the world is more beneficial to the individual than smoothing consumption across time. Such behavior is viewed as the intertemporal manifestation of ambiguity aversion. The second axiom extends Koopmans' notion of stationarity from deterministic to stochastic environments.