Ambiguity Aversion, Risk Aversion, and the Weight of Evidence

Wakker (1990) showed that under natural conditions the Choquet expected utility (CEU) and the rank-dependent utility (RDU) models are identical. Invoking Wakker's result and applying the certainty equivalent reduction procedure, this paper shows that risk aversion in the RDU model implies ambiguity aversion in the corresponding CEU model. Consequently, the pattern of choice depicted by Ellsberg's experiments and, more generally, preference for evidence to support their beliefs is an expression of decision makers' risk aversion. This paper also shows that, properly formulated, smooth ambiguity aversion may also be regarded as risk aversion