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Ambiguity Made Precise: A Comparative Foundation

Ghirardato, Paolo and Marinacci, Massimo (2002) Ambiguity Made Precise: A Comparative Foundation. Journal of Economic Theory, 102 (2). pp. 251-289. ISSN 0022-0531. doi:10.1006/jeth.2001.2815.

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The theory of subjective expected utility has been recently extended to allow ambiguity to matter for choice. We propose a notion of absolute ambiguity aversion by building on a notion of comparative ambiguity aversion. We characterize it for a preference model which encompasses some of the most popular models in the literature. We next build on these ideas to provide a definition of unambiguous act and event and show the characterization of the latter. As an illustration, we consider the classical Ellsberg 3-color urn problem and find that the notions developed in the paper provide intuitive answers.

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URLURL TypeDescription ItemEarlier version published as Social Science Working Paper 1026
Additional Information:© 2001 Elsevier. Received December 12, 1999; final version received August 18, 2000; published online October 6, 2001. An earlier version of this paper was circulated with the title “Ambiguity Made Precise: A Comparative Foundation and Some Implications.” We thank Kim Border, Eddie Dekel, Itzhak Gilboa, Tony Kwasnica, Antonio Rangel, David Schmeidler, audiences at Caltech, Johns Hopkins, Northwestern, NYU, Rochester, UC-Irvine, Université Paris I, the TARK VII-Summer Micro Conference (Northwestern, July 1998), the 1999 RUD Workshop, and especially Simon Grant, Peter Klibanoff, Biung-Ghi Ju, Peter Wakker, and an anonymous referee for helpful comments and discussion. Our greatest debt of gratitude is however to Larry Epstein, who sparked our interest on this subject with his paper [8] and stimulated it with many discussions. Marinacci gratefully acknowledges the financial support of MURST.
Funding AgencyGrant Number
Ministero dell'Istruzione, dell'Università e della Ricerca (MIUR)UNSPECIFIED
Subject Keywords:Ambiguity Aversion, Cardinal Risk Aversion, Choquet Expected Utility, Maxmin Expected Utility, Biseparable Preferences
Issue or Number:2
Record Number:CaltechAUTHORS:20170408-154332733
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:76056
Deposited By: 1Science Import
Deposited On:23 May 2017 19:48
Last Modified:15 Nov 2021 16:57

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