An Evolutionary Perspective on Updating Risk and Ambiguity Preferences

Abstract: We develop foundations for a model of risk and ambiguity preferences using an approach based on evolution and adaptation. Then, utilizing this new model, we address several outstanding issues in the existing literature, including how non-expected utility preferences and ambiguity averse preferences should change following the arrival of new information, and how ambiguity and risk attitudes might correlate across agents. We draw connections to a number of prominent models from the literature, clarifying which are supported by the evolutionary approach.