Ambiguity Made Precise: A Comparative Foundation and Some Implications
The theory of subjective expected utility (SEU) has been recently extended to allow ambiguity to matter for choice. We propose a notion of absolute ambiguity aversion by building on a notion of comparative ambiguity aversion. We characterize it for a preference model which encompasses some of the most popular models in the literature. We next build on these ideas to provide a definition of unambiguous act and event, and show the characterization of the latter. As an illustration, we consider the classical Ellsberg 3-color urn problem and find that the notions developed in the paper provide intuitive answers.
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| Length: | 38 pages |
| Date of creation: | Nov 1997 |
| Handle: | RePEc:clt:sswopa:1026 |
| Contact details of provider: | Postal: Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125 Phone: 626 395-4065 Fax: 626 405-9841 Web page: http://www.hss.caltech.edu/ss Email:
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| Order Information: | Postal: Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125 Email: |
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