The Subjectively Weighted Linear Utility (SWLU) model for decision making under uncertainty can accommodate non-neutral attitudes toward ambiguity. We first characterize ambiguity aversion in terms of the SWLU model parameters. In addition, we show that ambiguity content may reasonably be regarded as residing in the decision maker's subjective probability distribution of induced utility. In particular, (a) a special kind of mean preserving spread of the induced utility distribution will always increase ambiguity content, and (b) utility distributions which are more shiftable by new information have higher ambiguity content.
ASJC Scopus subject areas
- Decision Sciences(all)
- Management Science and Operations Research