A Cognitive Theory of Ambiguity Attitudes

Fernando Payró Chew, Norio Takeoka and Jianming Xia

No 1587, Working Papers from Barcelona School of Economics

Abstract: This paper provides axiomatic foundations for a model in which ambiguity attitudes are endogenously determined through cognitive optimization. The decision maker evaluates acts using alternative non-additive aggregation rules and optimally trades off the benefits of less ambiguity-averse evaluation against cognitive cost. The resulting framework generalizes Choquet expected utility and accounts for preference reversals identified by Machina (2009). The model is characterized by a novel axiom, Comonotonic Convexity, which regulates the evaluation of mixtures by requiring the decision maker to avoid hedging whenever it yields no benefit. We interpret this axiom as reflecting aversion to unnecessary complexity in the evaluation of acts.

Keywords: ambiguity attitude; Choquet expected utility; cognitive optimization; comonotonicity; Machina’s paradox (search for similar items in EconPapers)
JEL-codes: D11 D81 (search for similar items in EconPapers)
Date: 2026-07
New Economics Papers: this item is included in nep-neu
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