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Ever since Ellsberg

Author

Listed:
  • Aluma Dembo
  • Shachar Kariv
  • Matthew Polisson
  • John K. -H. Quah

Abstract

Ellsberg's famous paradox challenged Savage's subjective expected utility theory (EUT) -- which reduces uncertainty to risk -- by suggesting an aversion toward ambiguity. We provide a revealed preference test of the full set of axioms underpinning subjective EUT under uncertainty and compare it to an analogous test of objective EUT under risk. We find that individual choices are as consistent with utility maximization and expected utility maximization under uncertainty as they are under risk. Nevertheless, there is greater empirical scope for non-EUT models under uncertainty than under risk, and the absolute and relative consistency of EUT and non-EUT models vary considerably across subjects.

Suggested Citation

  • Aluma Dembo & Shachar Kariv & Matthew Polisson & John K. -H. Quah, 2026. "Ever since Ellsberg," Papers 2607.09355, arXiv.org.
  • Handle: RePEc:arx:papers:2607.09355
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    References listed on IDEAS

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