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Career concerns and ambiguity aversion

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Author Info

  • Rasmusen, Eric

Abstract

Why do people have ambiguity aversion, preferring, a gamble with a 50% chance of success to one whose expected probability of success is 50% but where that 50% is an unbiased estimate? The answer modelled here, in the spirit of the career concerns literature, is learning: a risk-averse person does not wish observers to learn whether he is good or bad at estimating probabilities. He therefore prefers a gamble with objective probabilities.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4YXP16G-3/2/f6e95fd93b53a9d722f25cf3d95500fd
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 108 (2010)
Issue (Month): 2 (August)
Pages: 175-177

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Handle: RePEc:eee:ecolet:v:108:y:2010:i:2:p:175-177

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Ambiguity Ellsberg paradox Career concerns;

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References

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  1. Yoram Halevy & Vincent Feltkamp, . "A Bayesian Approach to Uncentainty Aversion," Penn CARESS Working Papers f17f3e2c6ad93e4b53fd58fc9, Penn Economics Department.
  2. Milbourn, Todd T & Shockley, Richard L & Thakor, Anjan V, 2001. "Managerial Career Concerns and Investments in Information," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 334-51, Summer.
  3. Sujoy Mukerji & Peter Klibanoff, 2002. "A Smooth Model of Decision,Making Under Ambiguity," Economics Series Working Papers 113, University of Oxford, Department of Economics.
  4. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  5. Stephen Morris, 1997. "Risk, uncertainty and hidden information," Theory and Decision, Springer, vol. 42(3), pages 235-269, May.
  6. Heath, Chip & Tversky, Amos, 1991. " Preference and Belief: Ambiguity and Competence in Choice under Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 4(1), pages 5-28, January.
  7. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
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Citations

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Cited by:
  1. Trautmann, Stefan T. & Zeckhauser, Richard J., 2013. "Shunning uncertainty: The neglect of learning opportunities," Games and Economic Behavior, Elsevier, vol. 79(C), pages 44-55.
  2. Anwar, Sajid & Zheng, Mingli, 2012. "Competitive insurance market in the presence of ambiguity," Insurance: Mathematics and Economics, Elsevier, vol. 50(1), pages 79-84.

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