Ambiguity and the Bayesian Paradigm
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.
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References listed on IDEAS
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- Ramon Casadesus-Masanell & Peter Klibanoff & Emre Ozdenoren, 1998. "Maximum Expected Utility over Savage Acts with a Set of Priors," Discussion Papers 1218, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- 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.
- Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2008. "Uncertainty Averse Preferences," Carlo Alberto Notebooks 77, Collegio Carlo Alberto.
- 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.
- Al-Najjar, Nabil I. & Weinstein, Jonathan, 2009. "The Ambiguity Aversion Literature: A Critical Assessment," Economics and Philosophy, Cambridge University Press, vol. 25(03), pages 249-284, November. Full references (including those not matched with items on IDEAS)