Working Paper Series, Department of Economics, Copenhagen Business School
Estmating Aversion to Uncertainty
(), John Fountain, Glenn W. Harrison and Elisabet E. Rutström
Abstract: It is intuitive that decision-makers might have attitudes
towards uncertainty just as they might have attitudes towards risk.
However, it is only recently that this intuitive notion has been formalized
and axiomatically characterized. We estimate the extent of uncertainty
aversion in a manner that is parsimonious and consistent with theory. We
demonstrate that one can jointly estimate attitudes towards uncertainty,
attitudes towards risk, and subjective probabilities in a rigorous manner.
Our structural econometric model constructively demonstrates the
theoretical claims that it is possible to define uncertainty aversion in an
empirically tractable manner. Our results show that attitudes towards risk
and uncertainty can be different, qualitatively and quantitatively, and
that allowing for these differences can have significant effects on
inferences about subjective probabilities. †
Keywords: econometrics; uncertainty; risk; (follow links to similar papers)
JEL-Codes: C01; (follow links to similar papers)
71 pages, July 1, 2009
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