Intertemporal utility smoothing under uncertainty |
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Authors: | Katsutoshi Wakai |
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Institution: | 1. Graduate School of Economics, Kyoto University, Yoshida-honmachi, Sakyo-ku, Kyoto, 606-8501, Japan
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Abstract: | This paper axiomatizes a recursive utility model that captures both intertemporal utility smoothing defined across time and ambiguity aversion defined over states. The resulting representation adapts Wakai (Econometrica 76:137–153, 2008) model of intertemporal utility smoothing as an aggregator function, where the utility of the certainty equivalent of future uncertainty is computed by Gilboa and Schmeidler (J Math Econ 18:141–153, 1989) multiple-priors utility. The model also permits the separation of intertemporal utility smoothing from ambiguity aversion. |
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