Cobb-Douglas preferences under uncertainty
Faro, José Heleno
Cobb-Douglas preferences under uncertainty created by José Heleno Faro - Economic theory Volume 54, number 2 .
This paper axiomatizes Cobb-Douglas preferences under uncertainty. First, we extend the original Trockel (Econ Lett 30:7–10, 1989)’s axiomatic foundation to a general state space framework based on the Strong Homotheticity Axiom, obtaining also the incomplete case a la Bewley (Decis Econ Financ 25:79–110, 2002). We show that this key axiom for the Cobb-Douglas expected utility specification is refuted by Ellsberg’s uncertainty aversion behavioral pattern. Our main result provides a set of meaningful axioms characterizing Cobb-Douglas min-expected utility preferences, an important class of uncertainty averse preferences for studying the consequences of ambiguity in finance and other fields. Finally, we present briefly how to obtain more general representations like the variational case
09382259
Cobb-Douglas preferences--Ellsberg paradox--Expected utility
Knightian uncertainty--MEU preference--Incomplete preferences
HB119 ECO
Cobb-Douglas preferences under uncertainty created by José Heleno Faro - Economic theory Volume 54, number 2 .
This paper axiomatizes Cobb-Douglas preferences under uncertainty. First, we extend the original Trockel (Econ Lett 30:7–10, 1989)’s axiomatic foundation to a general state space framework based on the Strong Homotheticity Axiom, obtaining also the incomplete case a la Bewley (Decis Econ Financ 25:79–110, 2002). We show that this key axiom for the Cobb-Douglas expected utility specification is refuted by Ellsberg’s uncertainty aversion behavioral pattern. Our main result provides a set of meaningful axioms characterizing Cobb-Douglas min-expected utility preferences, an important class of uncertainty averse preferences for studying the consequences of ambiguity in finance and other fields. Finally, we present briefly how to obtain more general representations like the variational case
09382259
Cobb-Douglas preferences--Ellsberg paradox--Expected utility
Knightian uncertainty--MEU preference--Incomplete preferences
HB119 ECO