Epstein (2009) describes three Ellsberg-style thought experiments and argues that they pose difficulties for the smooth ambiguity model of decision making under uncertainty developed by Klibanoff, Marinacci and Mukerji (2005). We revisit these thought exeperiments and find, to the contrary, that they either point to strengths of the smooth ambiguity model compared to other models, such as the maximum expected utility model (Gilboa and Schmeidler, 1989), or, in the case of one thought experiment, raise criticisms that apply equally to a broad range of current ambiguity models.
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number
449.
Find related papers by JEL classification: D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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