Career Concerns and Ambiguity Aversion

Eric Rasmusen ()

No 2008-12, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: Why do people have ambiguity aversion, preferring, a gamble with a 50% chance of success to one whose expected probability of success is 50% but where that 50% is an unbiased estimate? The answer modelled here, in the spirit of the career concerns literature, is learning: a risk-averse person does not wish observers to learn whether he is good or bad at estimating probabilities. He therefore prefers a gamble with objective probabilities.

Keywords: time inconsistency; hyperbolic discounting (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-upt
Date: 2008-05
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