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Two Out Of Three Ain'T Bad: A Comment On “The Ambiguity Aversion Literature: A Critical Assessment”

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  • Siniscalchi, Marciano

Abstract

Al-Najjar and Weinstein (2009) propose to scrutinize the implications of recent theories of ambiguity in dynamic settings. They conclude that such implications are so unreasonable as to cast doubts on the legitimacy of the theories under consideration. The present paper argues that the seemingly unreasonable implications highlighted by Al-Najjar and Weinstein can be understood as the result of basic trade-offs that arise naturally in the presence of ambiguity. In particular, Al-Najjar and Weinstein are uncomfortable with the possibility that an ambiguity-averse individual may reject freely available information; however, this phenomenon simply reflects a trade-off between the intrinsic value of information, which is positive even in the presence of ambiguity, and the value of commitment .

Suggested Citation

  • Siniscalchi, Marciano, 2009. "Two Out Of Three Ain'T Bad: A Comment On “The Ambiguity Aversion Literature: A Critical Assessment”," Economics and Philosophy, Cambridge University Press, vol. 25(03), pages 335-356, November.
    • Handle: RePEc:cup:ecnphi:v:25:y:2009:i:03:p:335-356_99
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    Cited by:

    1. Baker, Erin & Bosetti, Valentina & Salo, Ahti, 2016. "Finding Common Ground when Experts Disagree: Belief Dominance over Portfolios of Alternatives," MITP: Mitigation, Innovation,and Transformation Pathways 243147, Fondazione Eni Enrico Mattei (FEEM).
    2. Gadi Barlevy, 2011. "Robustness and Macroeconomic Policy," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 1-24, September.
    3. Dominiak, Adam & Duersch, Peter & Lefort, Jean-Philippe, 2012. "A dynamic Ellsberg urn experiment," Games and Economic Behavior, Elsevier, vol. 75(2), pages 625-638.
    4. Loïc Berger, 2011. "Smooth Ambiguity Aversion in the Small and in the Large," Working Papers ECARES ECARES 2011-020, ULB -- Universite Libre de Bruxelles.
    5. Gumen, Anna & Savochkin, Andrei, 2013. "Dynamically stable preferences," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1487-1508.
    6. V. Yukalov & D. Sornette, 2011. "Decision theory with prospect interference and entanglement," Theory and Decision, Springer, vol. 70(3), pages 283-328, March.
    7. Pritsker, Matthew, 2013. "Knightian uncertainty and interbank lending," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 85-105.
    8. Vassili Vergopoulos, 2011. "Dynamic consistency for non-expected utility preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 493-518, October.
    9. Heyen, Daniel, 2017. "Ambiguity aversion under maximum-likelihood updating," LSE Research Online Documents on Economics 80342, London School of Economics and Political Science, LSE Library.

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