Recursive Smooth Ambiguity Preferences

Peter Klibanoff, Massimo Marinacci and Sujoy Mukerji

No 17, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: This paper axiomatizes an intertemporal version of the Smooth Ambiguity decision model developed in Klibanoff, Marinacci, and Mukerji (2005). A key feature of the model is that it achieves a separation between ambiguity, identified as a characteristic of the decision maker's subjective beliefs, and ambiguity attitude, a characteristic of the decision maker's tastes. In applications one may thus specify/vary these two characteristics independent of each other, thereby facilitating richer comparative statics and modeling flexibility than possible under other models which accomodate ambiguity sensitive preferences. Another key feature is that the preferences are dynamically consistent and have a recursive representation. Therefore techniques of dynamic programming can be applied when using this model.

Keywords: Ambiguity; Uncertainty; Knightian Uncertainty; Ambiguity Aversion; Uncertainty Aversion; Ellsberg Paradox; Dynamic Decision Making; Dynamic Programming under Ambiguity; Smooth Ambiguity. (search for similar items in EconPapers)
JEL-codes: D80 D81 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2006, Revised 2008
New Economics Papers: this item is included in nep-knm and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://www.carloalberto.org/wp-content/uploads/2018/11/no.17.pdf (application/pdf)

Related works:
Journal Article: Recursive smooth ambiguity preferences (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:17

Access Statistics for this paper

More papers in Carlo Alberto Notebooks from Collegio Carlo Alberto Contact information at EDIRC.
Bibliographic data for series maintained by Giovanni Bert ().