Recursive Ambiguity and Machina’s Examples

13 Pages Posted: 21 May 2012

See all articles by David Dillenberger

David Dillenberger

University of Pennsylvania - Department of Economics

Uzi Segal

Boston College - Department of Economics

Date Written: May 20, 2012

Abstract

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.

Keywords: Ambiguity, Ellsberg paradox, Choquet expected utility, recursive non-expected utility

JEL Classification: D81

Suggested Citation

Dillenberger, David and Segal, Uzi, Recursive Ambiguity and Machina’s Examples (May 20, 2012). PIER Working Paper No. 12-021, Available at SSRN: https://ssrn.com/abstract=2063939 or http://dx.doi.org/10.2139/ssrn.2063939

David Dillenberger (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-1503 (Phone)

Uzi Segal

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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