Belief hedges

Aurélien Baillon (), Han Bleichrodt, Chen Li and Peter P. Wakker
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Aurélien Baillon: Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR
Han Bleichrodt: Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR
Chen Li: Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR
Peter P. Wakker: Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR

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Abstract: We introduce belief hedges, i.e., sets of events whose uncertain subjective beliefs neutralize each other. Belief hedges allow us to measure ambiguity attitudes without knowing those subjective beliefs. They lead to improved ambiguity indexes that are valid under all popular ambiguity theories. Our indexes can be applied to real-world problems and do not require expected utility for risk or commitments to two-stage optimization, thereby increasing their descriptive power. Belief hedges make ambiguity theories widely applicable.

Keywords: Ambiguity aversion; Sources of uncertainty; Ellsberg paradox; Subjective beliefs (search for similar items in EconPapers)
Date: 2021-12-01
Note: View the original document on HAL open archive server: https://hal.science/hal-05644515v1
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Published in Journal of Economic Theory, 2021, 28 p. ⟨10.1016/j.jet.2021.105353⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05644515

DOI: 10.1016/j.jet.2021.105353

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