Recursive Ambiguity and Machina’s Examples
University of Pennsylvania - Department of Economics
Boston College - Department of Economics
May 20, 2012
PIER Working Paper No. 12-021
Machina (2009, 2012) lists a number of situations where standard models of ambiguity aversion are unable to capture plausible features of ambiguity attitudes. Most of these problems arise in choice over prospects involving three or more outcomes. We show that the recursive non-expected utility model of Segal (1987) is rich enough to accommodate all these situations.
Number of Pages in PDF File: 13
Keywords: Ambiguity, Ellsberg paradox, Choquet expected utility, recursive non-expected utility
JEL Classification: D81working papers series
Date posted: May 21, 2012
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