Ambiguity aversion and wealth effects

We study how changes in wealth affect ambiguity attitudes. We define a decision maker as decreasing (resp., increasing) absolute ambiguity averse if he becomes less (resp., more) ambiguity averse as he becomes richer. Our definition is behavioral. We provide different characterizations of these attitudes for a large class of preferences: monotone and continuous preferences which satisfy risk independence. We then specialize our results for different subclasses of preferences. Inter alia, our characterizations provide alternative ways to test experimentally the validity of some of the models of choice under uncertainty. (C) 2019 Published by Elsevier Inc.

Automated summary

This study examines the impact of wealth changes on attitudes towards ambiguity. The researchers define a decision maker as decreasing or increasing absolute ambiguity averse based on whether they become less or more averse to ambiguity as they become wealthier. The study provides different characterizations of these attitudes for a wide range of preferences, and offers alternative methods to experimentally test the validity of uncertainty choice models.