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Recursive smooth ambiguity preferences

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Author Info
Klibanoff, Peter
Marinacci, Massimo
Mukerji, Sujoy

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Abstract

This paper axiomatizes an intertemporal version of the Smooth Ambiguity decision model developed in [P. Klibanoff, M. Marinacci, S. Mukerji, A smooth model of decision making under ambiguity, Econometrica 73 (6) (2005) 1849-1892]. A key feature of the model is that it achieves a separation between ambiguity, identified as a characteristic of the decision maker's subjective beliefs, and ambiguity attitude, a characteristic of the decision maker's tastes. In applications one may thus specify/vary these two characteristics independent of each other, thereby facilitating richer comparative statics and modeling flexibility than possible under other models which accommodate ambiguity sensitive preferences. Another key feature is that the preferences are dynamically consistent and have a recursive representation. Therefore techniques of dynamic programming can be applied when using this model.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 3 (May)
Pages: 930-976
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Handle: RePEc:eee:jetheo:v:144:y:2009:i:3:p:930-976

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Web page: http://www.elsevier.com/locate/inca/622869

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Related research
Keywords: Ambiguity Uncertainty Knightian uncertainty Ambiguity aversion Uncertainty aversion Ellsberg paradox Dynamic decision making Dynamic programming under ambiguity Smooth ambiguity;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dirk Hackbarth & Jianjun Maio, 2007. "The Dynamics of Mergers and Acquisitions in Oligopolistic Industries," Boston University - Department of Economics - Working Papers Series WP2007-017, Boston University - Department of Economics. [Downloadable!]
  2. Sujoy Mukerji, 2009. "Foundations of ambiguity and economic modeling," Economics Series Working Papers 433, University of Oxford, Department of Economics. [Downloadable!]
  3. Esteban Jaimovich, 2007. "Sectoral Differentiation, Allocation of Talent, and Financial Development," Carlo Alberto Notebooks 59, Collegio Carlo Alberto, revised 2009. [Downloadable!]
  4. Salvatore Modica, 2008. "Unawareness, priors and posteriors," Decisions in Economics and Finance, Springer, vol. 31(2), pages 81-94, November. [Downloadable!] (restricted)
  5. Anat Bracha & Donald J. Brown, 2007. "Affective Decision Making: A Behavioral Theory of Choice," Cowles Foundation Discussion Papers 1633R, Cowles Foundation, Yale University, revised Apr 2009. [Downloadable!]
  6. Ju, Nengjiu & Miao, Jianjun, 2009. "Ambiguity, Learning, and Asset Returns," MPRA Paper 14737, University Library of Munich, Germany, revised Apr 2009. [Downloadable!]
  7. Kartik B. Athreya & Xuan S. Tam & Eric R. Young, 2009. "Are harsh penalties for default really better?," Working Paper 09-11, Federal Reserve Bank of Richmond. [Downloadable!]
  8. Elisa Luciano & Elena Vigna, 2006. "Non mean reverting affne processes for stochastic mortality," Carlo Alberto Notebooks 30, Collegio Carlo Alberto. [Downloadable!]
    Other versions:
  9. Matteo Triossi, 2006. "Application Costs in Sequential Admission Mechanisms," Carlo Alberto Notebooks 23, Collegio Carlo Alberto. [Downloadable!]
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