Ambiguous events and Maxmin Expected Utility
AbstractWe study the properties associated to various definitions of ambiguity (, ,  and ) in the context of Maximin Expected Utility (MEU). We show that each definition of unambiguous events produces certain restrictions on the set of priors, and completely characterize each definition in terms of the properties it imposes on the MEU functional. We apply our results to two open problems. First, in the context of MEU, we show the existence of a fundamental incompatibility between the axiom of "Small unambiguous event continuity" () and the notions of unambiguous event due to Zhang  and Epstein-Zhang . Second, we show that, in the context of MEU, the classes of unambiguous events according to either Zhang  or Epstein-Zhang  are always -systems. Finally, we reconsider the various definitions in light of our findings, and identify some new objects (Z-filters and EZ-filters) corresponding to properties which, while neglected in the current literature, seem relevant to us.
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Bibliographic InfoPaper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0405-09.
Length: 44 pages
Date of creation: 2004
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