IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v118y2013i1p206-208.html
   My bibliography  Save this article

Two examples of ambiguity aversion

Author

Listed:
  • Blavatskyy, Pavlo R.

Abstract

We consider two plausible and even natural examples of ambiguity aversion: the classical Ellsberg (1961) two-color paradox and a variant of the Machina (2009) reflection example. We extend the results of Baillon et al. (2011) and demonstrate that these two examples challenge the descriptive validity of Siniscalchi (2009) vector expected utility and the model of Nau (2006).

Suggested Citation

  • Blavatskyy, Pavlo R., 2013. "Two examples of ambiguity aversion," Economics Letters, Elsevier, vol. 118(1), pages 206-208.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:206-208
    DOI: 10.1016/j.econlet.2012.10.026
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176512005691
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2012.10.026?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Olivier L’Haridon & Lætitia Placido, 2010. "Betting on Machina’s reflection example: an experiment on ambiguity," Theory and Decision, Springer, vol. 69(3), pages 375-393, September.
    2. Tomasz Strzalecki, 2011. "Axiomatic Foundations of Multiplier Preferences," Econometrica, Econometric Society, vol. 79(1), pages 47-73, January.
    3. Aurelien Baillon & Olivier L'Haridon & Laetitia Placido, 2011. "Ambiguity Models and the Machina Paradoxes," American Economic Review, American Economic Association, vol. 101(4), pages 1547-1560, June.
    4. Lars Peter Hansen & Thomas J Sargent, 2014. "Robust Control and Model Uncertainty," World Scientific Book Chapters, in: UNCERTAINTY WITHIN ECONOMIC MODELS, chapter 5, pages 145-154, World Scientific Publishing Co. Pte. Ltd..
    5. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    6. Cerreia-Vioglio, S. & Maccheroni, F. & Marinacci, M. & Montrucchio, L., 2011. "Uncertainty averse preferences," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1275-1330, July.
    7. David S. Ahn, 2008. "Ambiguity Without a State Space," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(1), pages 3-28.
    8. Chateauneuf, Alain & Faro, José Heleno, 2009. "Ambiguity through confidence functions," Journal of Mathematical Economics, Elsevier, vol. 45(9-10), pages 535-558, September.
    9. Robert F. Nau, 2006. "Uncertainty Aversion with Second-Order Utilities and Probabilities," Management Science, INFORMS, vol. 52(1), pages 136-145, January.
    10. Ghirardato, Paolo & Maccheroni, Fabio & Marinacci, Massimo, 2004. "Differentiating ambiguity and ambiguity attitude," Journal of Economic Theory, Elsevier, vol. 118(2), pages 133-173, October.
    11. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
    12. Gilboa, Itzhak, 1987. "Expected utility with purely subjective non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 16(1), pages 65-88, February.
    13. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    14. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
    15. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2006. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Econometrica, Econometric Society, vol. 74(6), pages 1447-1498, November.
    16. Mark J. Machina, 2009. "Risk, Ambiguity, and the Rank-Dependence Axioms," American Economic Review, American Economic Association, vol. 99(1), pages 385-392, March.
    17. William Neilson, 2010. "A simplified axiomatic approach to ambiguity aversion," Journal of Risk and Uncertainty, Springer, vol. 41(2), pages 113-124, October.
    18. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
    19. Marciano Siniscalchi, 2009. "Vector Expected Utility and Attitudes Toward Variation," Econometrica, Econometric Society, vol. 77(3), pages 801-855, May.
    20. Wojciech Olszewski, 2007. "Preferences Over Sets of Lotteries -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(2), pages 567-595.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Keiran Sharpe, 2023. "On the Ellsberg and Machina paradoxes," Theory and Decision, Springer, vol. 95(4), pages 539-573, November.
    2. Blavatskyy, Pavlo, 2016. "Probability weighting and L-moments," European Journal of Operational Research, Elsevier, vol. 255(1), pages 103-109.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Karni, Edi & Maccheroni, Fabio & Marinacci, Massimo, 2015. "Ambiguity and Nonexpected Utility," Handbook of Game Theory with Economic Applications,, Elsevier.
    2. Christoph Bühren & Fabian Meier & Marco Pleßner, 2023. "Ambiguity aversion: bibliometric analysis and literature review of the last 60 years," Management Review Quarterly, Springer, vol. 73(2), pages 495-525, June.
    3. Adam Dominiak & Jean-Philippe Lefort, 2021. "Ambiguity and Probabilistic Information," Management Science, INFORMS, vol. 67(7), pages 4310-4326, July.
    4. Jewitt, Ian & Mukerji, Sujoy, 2017. "Ordering ambiguous acts," Journal of Economic Theory, Elsevier, vol. 171(C), pages 213-267.
    5. König-Kersting, Christian & Kops, Christopher & Trautmann, Stefan T., 2023. "A test of (weak) certainty independence," Journal of Economic Theory, Elsevier, vol. 209(C).
    6. Stefan Trautmann & Peter P. Wakker, 2018. "Making the Anscombe-Aumann approach to ambiguity suitable for descriptive applications," Journal of Risk and Uncertainty, Springer, vol. 56(1), pages 83-116, February.
    7. Ying He, 2021. "Revisiting Ellsberg’s and Machina’s Paradoxes: A Two-Stage Evaluation Model Under Ambiguity," Management Science, INFORMS, vol. 67(11), pages 6897-6914, November.
    8. Robin Cubitt & Gijs van de Kuilen & Sujoy Mukerji, 2020. "Discriminating Between Models of Ambiguity Attitude: a Qualitative Test," Journal of the European Economic Association, European Economic Association, vol. 18(2), pages 708-749.
    9. Aurélien Baillon & Zhenxing Huang & Asli Selim & Peter P. Wakker, 2018. "Measuring Ambiguity Attitudes for All (Natural) Events," Econometrica, Econometric Society, vol. 86(5), pages 1839-1858, September.
    10. Amit Kothiyal & Vitalie Spinu & Peter Wakker, 2014. "An experimental test of prospect theory for predicting choice under ambiguity," Journal of Risk and Uncertainty, Springer, vol. 48(1), pages 1-17, February.
    11. Hill, Brian, 2023. "Beyond uncertainty aversion," Games and Economic Behavior, Elsevier, vol. 141(C), pages 196-222.
    12. Madhav Chandrasekher & Mira Frick & Ryota Iijima & Yves Le Yaouanq, 2022. "Dual‐Self Representations of Ambiguity Preferences," Econometrica, Econometric Society, vol. 90(3), pages 1029-1061, May.
    13. Arthur E. Attema & Han Bleichrodt & Olivier L'Haridon, 2018. "Ambiguity preferences for health," Health Economics, John Wiley & Sons, Ltd., vol. 27(11), pages 1699-1716, November.
    14. Yehuda Izhakian & Zur Izhakian, 2015. "Decision making in phantom spaces," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 58(1), pages 59-98, January.
    15. Junyi Chai & Zhiquan Weng & Wenbin Liu, 2021. "Behavioral Decision Making in Normative and Descriptive Views: A Critical Review of Literature," JRFM, MDPI, vol. 14(10), pages 1-14, October.
    16. Ghirardato, Paolo & Pennesi, Daniele, 2020. "A general theory of subjective mixtures," Journal of Economic Theory, Elsevier, vol. 188(C).
    17. Frick, Mira & Iijima, Ryota & Le Yaouanq, Yves, 2019. "Boolean Representations of Preferences under Ambiguity," Rationality and Competition Discussion Paper Series 173, CRC TRR 190 Rationality and Competition.
    18. Peter Klibanoff & Sujoy Mukerji & Kyoungwon Seo, 2014. "Perceived Ambiguity and Relevant Measures," Econometrica, Econometric Society, vol. 82(5), pages 1945-1978, September.
    19. Cerreia-Vioglio, Simone & Maccheroni, Fabio & Marinacci, Massimo & Montrucchio, Luigi, 2013. "Ambiguity and robust statistics," Journal of Economic Theory, Elsevier, vol. 148(3), pages 974-1049.
      • Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2011. "Ambiguity and Robust Statistics," Working Papers 382, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    20. Keiran Sharpe, 2023. "On the Ellsberg and Machina paradoxes," Theory and Decision, Springer, vol. 95(4), pages 539-573, November.

    More about this item

    Keywords

    Subjective uncertainty; Ambiguity; Ambiguity aversion; Ellsberg paradox; Reflection example;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:206-208. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.