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On ambiguity apportionment

Author

Listed:
  • Christophe Courbage

    (The Geneva Association)

  • Béatrice Rey

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper investigates the notion of changes in ambiguity over loss probabilities in the smooth ambiguity model developed by Klibanoff, Marinacci and Mukerji (Econometrica 73:1849-1892, 2005). Changes in ambiguity over loss probabilities are expressed through the specific concept of stochastic dominance of order n defined by Ekern (Econ Lett 6:329-333, 1980). We characterize conditions on the function capturing attitudes towards ambiguity under which an individual always considers one situation to be more ambiguous than another in a model of two states of nature. We propose an intuitive interpretation of the properties of this function in terms of preferences for harms disaggregation over probabilities, also labelled ambiguity apportionment.

Suggested Citation

  • Christophe Courbage & Béatrice Rey, 2016. "On ambiguity apportionment," Post-Print halshs-01290062, HAL.
    • Handle: RePEc:hal:journl:halshs-01290062
    DOI: 10.1007/s00712-016-0473-9
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    References listed on IDEAS

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    Cited by:

    1. Han Bleichrodt & Christophe Courbage & Béatrice Rey, 2019. "The value of a statistical life under changes in ambiguity," Journal of Risk and Uncertainty, Springer, vol. 58(1), pages 1-15, February.
    2. Nie, Pu-yan & Wang, Chan & Chen, Zi-yue & Chen, You-hua, 2018. "A theoretic analysis of key person insurance," Economic Modelling, Elsevier, vol. 71(C), pages 272-278.

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    More about this item

    Keywords

    Smooth ambiguity aversion; more ambiguity; ambiguity apportionment; stochastic dominance;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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