Theory and Decision 42 (3):235-269 (1997)

People are less willing to accept bets about an event when they do not know the true probability of that event. Such uncertainty aversion has been used to explain certain economic phenomena. This paper considers how far standard private information explanations (with strategic decisions to accept bets) can go in explaining phenomena attributed to uncertainty aversion. This paper shows that if two individuals have different prior beliefs about some event, and two sided private information, then each individual’s willingness to bet will exhibit a bid ask spread property. Each individual is prepared to bet for the event, at sufficiently favorable odds, and against, at sufficiently favorable odds, but there is an intermediate range of odds where each individual is not prepared to bet either way. This is only true if signals are distributed continuously and sufficiently smoothly. It is not true, for example, in a finite signal model
Keywords Subjective probability  uncertainty aversion  asymmetricinformation  willingness to bet
Categories (categorize this paper)
DOI 10.1023/A:1017913032257
Edit this record
Mark as duplicate
Export citation
Find it on Scholar
Request removal from index
Revision history

Download options

PhilArchive copy

Upload a copy of this paper     Check publisher's policy     Papers currently archived: 53,548
External links

Setup an account with your affiliations in order to access resources via your University's proxy server
Configure custom proxy (use this if your affiliation does not provide a proxy)
Through your library

References found in this work BETA

No references found.

Add more references

Citations of this work BETA

Add more citations

Similar books and articles

Economic (Ir)Rationality in Risk Analysis.Sven Ove Hansson - 2006 - Economics and Philosophy 22 (2):231-241.
Contradictory Information: Too Much of a Good Thing. [REVIEW]J. Michael Dunn - 2010 - Journal of Philosophical Logic 39 (4):425 - 452.
Creativity, Probability and Uncertainty.Matthew C. Wilson - 2009 - Journal of Economic Methodology 16 (1):45-56.
Relative Uncertainty in Term Loan Projection Models: What Lenders Could Tell Risk Managers.Lisa Warenski - 2012 - Journal of Experimental and Artificial Intelligence 24 (4):501-511.
Varieties of Risk Representations.John Kadvany - 1997 - Journal of Social Philosophy 28 (3):123-143.


Added to PP index

Total views
43 ( #223,822 of 2,348,322 )

Recent downloads (6 months)
2 ( #329,111 of 2,348,322 )

How can I increase my downloads?


My notes