A Rational Ambiguity Averse Person Will Never Display Her Ambiguity Aversion

34 Pages Posted: 15 Apr 2013 Last revised: 19 Nov 2013

See all articles by Christoph Kuzmics

Christoph Kuzmics

University of Graz - Department of Economics

Date Written: November 15, 2013

Abstract

Suppose a decision maker (DM), in the language of Anscombe and Aumann (1963), has preferences over acts (horse-race lotteries) that satisfy the von Neumann and Morgenstern (1944) axioms for objective lotteries (constant acts) and Anscombe and Aumann's (1963) Axioms of Reversal of Order and Dominance. This DM may have preferences that accommodate ambiguity aversion. Suppose the DM can choose acts objectively randomly (by flipping her own fair coin, for instance). Suppose the DM is able to (has the willpower to) commit to her ex-ante choice of a possibly self-generated random act. Then there is no set of decision problems an analyst can give this DM in which the DM can be shown to be ambiguity-averse.

Suggested Citation

Kuzmics, Christoph, A Rational Ambiguity Averse Person Will Never Display Her Ambiguity Aversion (November 15, 2013). Available at SSRN: https://ssrn.com/abstract=2250970 or http://dx.doi.org/10.2139/ssrn.2250970

Christoph Kuzmics (Contact Author)

University of Graz - Department of Economics ( email )

Universitaetsstrasse 15
RESOWI - F4
Graz, 8010
Austria

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