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Research Details
Recrusive Utility and Parameter Uncertainty, Journal of economic theory
Abstract
We explore how the Epstein-Zin utility captures an agent's sensitivity to parameter uncertainty. Our main result is a closed-form representation of the Epstein-Zin utility for an i.i.d. consumption process with unknown parameter, as the discount factors approaches 1. In this representation, the coefficient of relative risk aversion characterizes the attitude to parameter uncertainty.
Type
Article
Author(s)
Date Published
2019
Citations
Al-Najjar, Nabil, and Eran Shmaya. 2019. Recrusive Utility and Parameter Uncertainty. Journal of economic theory. 118: 274–288.