Two out of three ain't bad: A comment on the ambiguity aversion literature: A critical assessment

Al-Najjar and Weinstein (2009) propose to scrutinize the implications of recent theories of ambiguity in dynamic settings. They conclude that such implications are so unreasonable as to cast doubts on the legitimacy of the theories under consideration. The present paper argues that the seemingly unreasonable implications highlighted by Al-Najjar and Weinstein can be understood as the result of basic trade-offs that arise naturally in the presence of ambiguity. In particular, Al-Najjar and Weinstein are uncomfortable with the possibility that an ambiguity-averse individual may reject freely available information; however, this phenomenon simply reflects a trade-off between the intrinsic value of information, which is positive even in the presence of ambiguity, and the value of commitment.