When is Ambiguity-Attitude Constant?
35 Pages Posted: 4 Apr 2012
Date Written: March 30, 2012
This paper studies how updating affects ambiguity-attitude. In particular we focus on the generalized Bayesian update of the Jaffray-Phillipe sub-class of Choquet Expected Utility preferences. We find conditions for ambiguity-attitude to be the same before and after updating. A necessary and sufficient condition for ambiguity-attitude to be unchanged when updated on an arbitrary event is for the capacity to be neo-additive. We find a condition for updating on a given partition to preserve ambiguity-attitude. We relate this to necessary and sufficient conditions for dynamic consistency. Finally we study whether ambiguity increases or decreases after updating.
Keywords: ambiguity, generalized Bayesian update, learning, dynamic consistency, Choquet Expected Utility
JEL Classification: C720, D810
Suggested Citation: Suggested Citation