Temporal Resolution of Uncertainty and Recursive Models of Ambiguity Aversion
AbstractModels of ambiguity aversion have recently found many applications in dynamic settings. This paper shows that there is a strong interdependence between ambiguity aversion and the preferences for the timing of the resolution of uncertainty, as de ned by the classic work of Kreps and Porteus (1978): the modeling choices that are being made in the domain of ambiguity aversion influence the set of modeling choices available in the domain of timing attitudes. The main result of the paper is that the only model of ambiguity aversion that exhibits indi erence to timing is the maxmin expected utility of Gilboa and Schmeidler (1989). This paper also examines the structure of the timing nonindi erence implied by the other commonly used models of ambiguity aversion. The interdependence of ambiguity and timing that this paper identi es is of interest both conceptually and practicallyÃ¢â¬âespecially for economists using these models in applications.
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Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 81 (2013)
Issue (Month): 3 (05)
Other versions of this item:
- Tomasz Strzalecki, . "Temporal Resolution of Uncertainty and Recursive Models of Ambiguity Aversion," Working Paper 8240, Harvard University OpenScholar.
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