Differentiating ambiguity and ambiguity attitude |
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Authors: | Paolo Ghirardato Fabio Maccheroni |
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Affiliation: | a Dipartimento di Statistica e Matematica Applicata and ICER, Università di Torino, Italy b IMQ and IGIER, Università Bocconi, Italy |
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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. We also characterize axiomatically a special case of our decision model, the “α-maxmin” expected utility model. |
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Keywords: | D80 D81 |
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