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Belief hedges

Author

Listed:
  • Aurélien Baillon

    (Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR)

  • Han Bleichrodt

    (Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR)

  • Chen Li

    (Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR)

  • Peter P. Wakker

    (Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR)

Abstract

We introduce belief hedges, i.e., sets of events whose uncertain subjective beliefs neutralize each other. Belief hedges allow us to measure ambiguity attitudes without knowing those subjective beliefs. They lead to improved ambiguity indexes that are valid under all popular ambiguity theories. Our indexes can be applied to real-world problems and do not require expected utility for risk or commitments to two-stage optimization, thereby increasing their descriptive power. Belief hedges make ambiguity theories widely applicable.

Suggested Citation

  • Aurélien Baillon & Han Bleichrodt & Chen Li & Peter P. Wakker, 2021. "Belief hedges," Post-Print hal-05644515, HAL.
    • Handle: RePEc:hal:journl:hal-05644515
    DOI: 10.1016/j.jet.2021.105353
    Note: View the original document on HAL open archive server: https://hal.science/hal-05644515v1
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