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Recursive Ambiguity and Machina's Examples

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Author Info

  • David Dillenberger

    ()
    (University of Pennsylvania)

  • Uzi Segal

    ()
    (Boston College)

Abstract

Machina (2009, 2012) lists a number of situations where standard models of ambiguity aversion are unable to capture plausible features of ambiguity attitudes. Most of these problems arise in choice over prospects involving three or more outcomes. We show that the recursive non-expected utility model of Segal (1987) is rich enough to accommodate all these situations.

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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 800.

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Date of creation: 20 May 2012
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Handle: RePEc:boc:bocoec:800

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Keywords: Ambiguity; Ellsberg paradox; Choquet expected utility; recursive non-expected utility;

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  1. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  2. Halevy, Yoram, 2005. "Ellsberg Revisited: an Experimental Study," Microeconomics.ca working papers halevy-05-07-26-11-51-13, Vancouver School of Economics, revised 25 Feb 2014.
  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. Dillenberger, David, 2008. "Preferences for One-Shot Resolution of Uncertainty and Allais-Type Behavior," MPRA Paper 8342, University Library of Munich, Germany.
  5. Aurelien Baillon & Olivier L'Haridon & Laetitia Placido, 2011. "Ambiguity Models and the Machina Paradoxes," American Economic Review, American Economic Association, vol. 101(4), pages 1547-60, June.
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