Ambiguity and ambiguity aversion

Research output: Chapter in Book/Report/Conference proceedingEntry for encyclopedia/dictionary

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.
Original languageEnglish (US)
Title of host publicationThe New Palgrave Dictionary of Economics
EditorsSteven N Durlauf, Lawrence E Blume
PublisherPalgrave-Macmillan
Edition2
ISBN (Electronic)978-1-349-58802-2
ISBN (Print)978-0-333-78676-5
StatePublished - 2008

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  • Cite this

    Siniscalchi, M. (2008). Ambiguity and ambiguity aversion. In S. N. Durlauf, & L. E. Blume (Eds.), The New Palgrave Dictionary of Economics (2 ed.). Palgrave-Macmillan.