The objective of this paper is to show how ambiguity, and a decision maker (DM)’s response to it, can be modelled formally in the context of a general decision model. We introduce a relation derived from the DM’s preferences, called ‘‘unambiguous preference’’, and show that it can be represented by a set of probabilities. We provide such set with a simple differential characterization, and argue that it is a behavioral representation of the ‘‘ambiguity’’ that the DM may perceive. Given such revealed ambiguity, we provide a representation of ambiguity attitudes.
Differentiating ambiguity and ambiguity attitude
Ghirardato, Paolo;Maccheroni, Fabio;Marinacci, Massimo
2004
Abstract
The objective of this paper is to show how ambiguity, and a decision maker (DM)’s response to it, can be modelled formally in the context of a general decision model. We introduce a relation derived from the DM’s preferences, called ‘‘unambiguous preference’’, and show that it can be represented by a set of probabilities. We provide such set with a simple differential characterization, and argue that it is a behavioral representation of the ‘‘ambiguity’’ that the DM may perceive. Given such revealed ambiguity, we provide a representation of ambiguity attitudes.File in questo prodotto:
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