On Ambiguity Apportionment

GATE WP 1527

14 Pages Posted: 3 Nov 2015

See all articles by Christophe Courbage

Christophe Courbage

Haute Ecole de Gestion de Genève - University of Applied Sciences Western Switzerland (HES-SO)

Béatrice Rey

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)

Date Written: November 2, 2015

Abstract

This paper investigates the notion of changes in ambiguity over loss probabilities in the smooth ambiguity model developed by Klibanoff, Marinacci and Mukerji (2005). Changes in ambiguity over loss probabilities are expressed through the specific concept of stochastic dominance of order n defined by Ekern (1980). We characterize conditions on the function capturing attitudes towards ambiguity under which an individual always considers one situation to be more ambiguous than another in a model of two states of nature. We propose an intuitive interpretation of the properties of this function in terms of preferences for harms disaggregation over probabilities, also labelled ambiguity apportionment.

Keywords: Smooth ambiguity aversion, more ambiguity, ambiguity apportionment, stochastic dominance

JEL Classification: D81, H50

Suggested Citation

Courbage, Christophe and Rey, Béatrice, On Ambiguity Apportionment (November 2, 2015). GATE WP 1527 , Available at SSRN: https://ssrn.com/abstract=2685046 or http://dx.doi.org/10.2139/ssrn.2685046

Christophe Courbage (Contact Author)

Haute Ecole de Gestion de Genève - University of Applied Sciences Western Switzerland (HES-SO) ( email )

Geneva
Switzerland

Béatrice Rey

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE) ( email )

93, chemin des Mouilles
Ecully, 69130
France

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
39
Abstract Views
492
PlumX Metrics