Testing Hurwicz Expected Utility

Gul and Pesendorfer (2015) propose a promising theory of decision under uncertainty, they dub Hurwicz expected utility (HEU). HEU is special case α ‐maxmin EU that allows for preferences over sources uncertainty. It consistent with most the available empirical evidence on risk We show also tractable can readily be measured tested. do this by deriving new two‐parameter functional form probability weighting function, which fits our data well offers clean separation between ambiguity perception aversion. In two experiments, we find support HEU's predictions aversion constant across uncertainty first order are positively correlated.