Intertemporal substitution, risk aversion and ambiguity aversion |
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Authors: | Takashi Hayashi |
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Affiliation: | (1) Department of Economics, University of Rochester, NY 14627 Rochester, USA |
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Abstract: | Summary. This paper axiomatizes a form of recursive utility on consumption processes that permits a role for ambiguity as well as risk. The model has two prominent special cases: (i) the recursive model of risk preference due to Kreps and Porteus [18]; and (ii) an intertemporal version of multiple-priors utility due to Epstein and Schneider [8]. The generalization presented here permits a three-way separation of intertemporal substitution, risk aversion and ambiguity aversion.Received: 5 August 2003, Revised: 12 March 2004, JEL Classification Numbers: D80, D81, D90.I am grateful to Larry Epstein for his guidance and invaluable advice, and to a referee for helpful comments and suggestions. |
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Keywords: | Generalized recursive multiple-priors utility Risk aversion Ambiguity aversion. |
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