| Original language | English (US) |
|---|---|
| Title of host publication | The New Palgrave Dictionary of Economics |
| Editors | Steven N Durlauf, Lawrence E Blume |
| Publisher | Palgrave-Macmillan |
| Edition | 2 |
| ISBN (Electronic) | 978-1-349-58802-2 |
| ISBN (Print) | 978-0-333-78676-5 |
| State | Published - 2008 |
Abstract
Experimental evidence strongly suggests that subjects facing a decision under uncertainty often find it difficult to assess the relative likelihood of certain events; decision theorists deem such events ‘ambiguous’. Furthermore, subjects generally dislike options (acts) whose final outcome depends upon the realization of such ambiguous events; that is, they are ‘ambiguity-averse’. This article surveys the main decision-theoretic models developed since the mid-1980s to accommodate ambiguity and ambiguity aversion, including Choquet-expected utility (Schmeidler, 1989) and maxmin expected utility (Gilboa and Schmeidler, 1989). More recent developments in the theory of ambiguity are also briefly summarized.