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.
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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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Hayashi, T. Intertemporal substitution, risk aversion and ambiguity aversion. Economic Theory 25, 933–956 (2005). https://doi.org/10.1007/s00199-004-0508-2
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DOI: https://doi.org/10.1007/s00199-004-0508-2