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Ambiguity Made Precise: A Comparative Foundation

Ghirardato, Paolo and Marinacci, Massimo (2000) Ambiguity Made Precise: A Comparative Foundation. Social Science Working Paper, 1026. California Institute of Technology , Pasadena, CA. (Unpublished)

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The theory of subjective expected utility (SEU) 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.

Item Type:Report or Paper (Working Paper)
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URLURL TypeDescription ItemLater version published in Journal of Economic Theory
Additional Information:Revised. Originally dated to October 1997. 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, Universite 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, and stimulated it with many discussions. Marinacci gratefully acknowledges the financial support of MURST.
Group:Social Science Working Papers
Funding AgencyGrant Number
Ministero dell'università e della ricerca (MURST)Cofin2000
Subject Keywords:Ambiguity Aversion, Cardinal Risk Aversion, Choquet Expected Utility, Maxmin Expected Utility, Biseparable Preferences
Series Name:Social Science Working Paper
Issue or Number:1026
Classification Code:JEL: D81
Record Number:CaltechAUTHORS:20171106-162252775
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83010
Deposited By: Jacquelyn Bussone
Deposited On:07 Nov 2017 17:56
Last Modified:03 Oct 2019 19:01

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