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Two examples of ambiguity aversion

  • Blavatskyy, Pavlo R.
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    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).

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    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 118 (2013)
    Issue (Month): 1 ()
    Pages: 206-208

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    Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:206-208
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    1. 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.
    2. Chateauneuf, Alain & Faro, José Heleno, 2009. "Ambiguity through confidence functions," Journal of Mathematical Economics, Elsevier, vol. 45(9-10), pages 535-558, September.
    3. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
    4. David S. Ahn, 2008. "Ambiguity Without a State Space," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 3-28.
    5. 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.
    6. Strzalecki, Tomasz, 2011. "Axiomatic Foundations of Multiplier Preferences," Scholarly Articles 14397610, Harvard University Department of Economics.
    7. Marciano Siniscalchi, 2009. "Vector Expected Utility and Attitudes Toward Variation," Econometrica, Econometric Society, vol. 77(3), pages 801-855, 05.
    8. Robert F. Nau, 2006. "Uncertainty Aversion with Second-Order Utilities and Probabilities," Management Science, INFORMS, vol. 52(1), pages 136-145, January.
    9. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2004. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Carlo Alberto Notebooks 12, Collegio Carlo Alberto, revised 2006.
    10. Thomas J. Sargent & LarsPeter Hansen, 2001. "Robust Control and Model Uncertainty," American Economic Review, American Economic Association, vol. 91(2), pages 60-66, May.
    11. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2002. "A smooth model of decision making under ambiguity," ICER Working Papers - Applied Mathematics Series 11-2003, ICER - International Centre for Economic Research, revised Apr 2003.
    12. Ghirardato, Paolo & Maccheroni, Fabio & Marinacci, Massimo, 2004. "Differentiating ambiguity and ambiguity attitude," Journal of Economic Theory, Elsevier, vol. 118(2), pages 133-173, October.
    13. William Neilson, 2010. "A simplified axiomatic approach to ambiguity aversion," Journal of Risk and Uncertainty, Springer, vol. 41(2), pages 113-124, October.
    14. 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.
    15. 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.
    16. Itzhak Gilboa & David Schmeidler, 1989. "Maxmin Expected Utility with Non-Unique Prior," Post-Print hal-00753237, HAL.
    17. Mark J. Machina, 2009. "Risk, Ambiguity, and the Rank-Dependence Axioms," American Economic Review, American Economic Association, vol. 99(1), pages 385-92, March.
    18. Wojciech Olszewski, 2007. "Preferences Over Sets of Lotteries -super-1," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 567-595.
    19. Gilboa, Itzhak, 1987. "Expected utility with purely subjective non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 16(1), pages 65-88, February.
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