Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 07-2009: Estmating Aversion to Uncertainty

Steffen Andersen (), John Fountain , Glenn W. Harrison and Elisabet E. Rutström
Additional contact information
Steffen Andersen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Porcelænshaven 16 A, 1, DK-2000 Frederiksberg, Denmark

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

JEL-codes: C01

71 pages, July 1, 2009

Full text files

7803  

Download statistics

Questions (including download problems) about the papers in this series should be directed to Lars Nondal ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:31:15.