When is Ambiguity-Attitude Constant?

35 Pages Posted: 4 Apr 2012

See all articles by Jürgen Eichberger

Jürgen Eichberger

Heidelberg University - Alfred Weber Institute for Economics

Simon Grant

Rice University - Department of Economics; Australian National University

David Kelsey

University of Exeter Business School - Department of Economics

Date Written: March 30, 2012

Abstract

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

Eichberger, Jürgen and Grant, Simon Harold and Kelsey, David, When is Ambiguity-Attitude Constant? (March 30, 2012). CESifo Working Paper Series No. 3768. Available at SSRN: https://ssrn.com/abstract=2034237

Jürgen Eichberger

Heidelberg University - Alfred Weber Institute for Economics ( email )

Heidelberg, D-69117
Germany

Simon Harold Grant

Rice University - Department of Economics ( email )

6100 South Main Street
Houston, TX 77005
United States
713-348-3332 (Phone)
713-348-6329 (Fax)

Australian National University ( email )

Coombs Building 9
Canberra, Australian Capital Territory 0200
Australia
61-2-6125-4602 (Phone)
61-2-6125-3051 (Fax)

David Kelsey (Contact Author)

University of Exeter Business School - Department of Economics ( email )

Streatham Court
Exeter, Devon EX4 4PU
United Kingdom
013 9226 2536 (Phone)

HOME PAGE: http://people.exeter.ac.uk/dk210/

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