The Price for Information about Probabilities and its Relation with Capacities
In this paper ambiguity aversion is measured through the maximum price the decision maker is willing to pay in order to know the probability of an event. Two comparative problems are examined in which the decision maker faces an act: in one case buying information implies playing a lottery, while in the other case buying information gives also the option to avoid playing the lottery. In both decision settings, relying on Choquet expected utility model, we study how the decision maker’s risk and ambiguity attitudes affect the reservation price for information. These effects are analyzed for different levels of ambiguity of the act.
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- Arthur Snow, 2010. "Ambiguity and the value of information," Journal of Risk and Uncertainty, Springer, vol. 40(2), pages 133-145, April.
- Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2006.
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Econometric Society, vol. 74(6), pages 1447-1498, November.
- Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2004. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Carlo Alberto Notebooks 12, Collegio Carlo Alberto, revised 2006.
- Dominiak, Adam & Schnedler, Wendelin, 2010.
"Attitudes towards Uncertainty and Randomization: An Experimental Study,"
0494, University of Heidelberg, Department of Economics.
- Adam Dominiak & Wendelin Schnedler, 2011. "Attitudes toward uncertainty and randomization: an experimental study," Economic Theory, Springer, vol. 48(2), pages 289-312, October.
- Mark Machina, 2004. "Almost-objective uncertainty," Economic Theory, Springer, vol. 24(1), pages 1-54, 07.
- John Quiggin, 2007. "Ambiguity and the Value of Information: An Almost-objective Events Analysis," Economic Theory, Springer, vol. 30(3), pages 409-414, March.
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