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Ambiguity and the Bayesian Paradigm

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  • Itzhak Gilboa
  • Massimo Marinacci

Abstract

This is a survey of some of the recent decision-theoretic literature involving beliefs that cannot be quantified by a Bayesian prior. We discuss historical, philosophical, and axiomatic foundations of the Bayesian model, as well as of several alternative models recently proposed. The definition and comparison of ambiguity aversion and the updating of non-Bayesian beliefs are briefly discussed. Finally, several applications are mentioned to illustrate the way that ambiguity (or “Knightian uncertainty”) can change the way we think about economic problems.

Suggested Citation

  • Itzhak Gilboa & Massimo Marinacci, 2011. "Ambiguity and the Bayesian Paradigm," Working Papers 379, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    • Handle: RePEc:igi:igierp:379
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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.
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    3. Casadesus-Masanell, Ramon & Klibanoff, Peter & Ozdenoren, Emre, 2000. "Maxmin Expected Utility over Savage Acts with a Set of Priors," Journal of Economic Theory, Elsevier, vol. 92(1), pages 35-65, May.
    4. Yaari, Menahem E., 1969. "Some remarks on measures of risk aversion and on their uses," Journal of Economic Theory, Elsevier, vol. 1(3), pages 315-329, October.
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    6. Itzhak Gilboa, 2004. "Uncertainty in Economic Theory," Post-Print hal-00756317, HAL.
    7. Al-Najjar, Nabil I. & Weinstein, Jonathan, 2009. "The Ambiguity Aversion Literature: A Critical Assessment," Economics and Philosophy, Cambridge University Press, vol. 25(3), pages 249-284, November.
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