UNCERTAINTY AVERSION AND AVERSION TO INCREASING UNCERTAINTY

According to the original Ellsberg (1961) examples there is uncertaint y aversion if the decision maker prefers to bet on an urn of known com position rather than on an urn of unknown composition. According to an other definition (Schmeidler, 1989), there is uncertainty aversion if any convex combination of two acts is preferred to the least favorable of these acts. We show that these two definitions differ: while the f irst one truly refers to uncertainty aversion, the second one refers t o aversion to increasing uncertainty. Besides, with reference to Choqu et Expected Utility theory, uncertainty aversion means that there exis ts the core of a capacity, while aversion to increasing uncertainty me ans that the capacity is convex. Consequently, aversion to increasing uncertainty implies uncertainty aversion, but the opposite does not ho ld. We also show that a completely analogous situation holds for the c ase of risk and we define a set of risk and uncertainty premiums accor ding to the previous analysis.