Comment on “Ellsberg's two‐color experiment, portfolio inertia and ambiguity”
Sujoy Mukerji (),
Norio Takeoka and
Jean-Marc Tallon ()
International Journal of Economic Theory, 2008, vol. 4, issue 3, 433-444
In the setting of Ellsberg's two‐color experiment, Mukerji and Tallon (2003) claim, without relying on particular representations, that ambiguity‐averse behavior implies subjective portfolio inertia. In this note, we point out using a counterexample that their axioms are not enough to establish the result. We fill in the gap in their argument using additional axioms and argue that these axioms are of their own interest in that they behaviorally separate two prominent models of ambiguity: the maximin expected utility and smooth ambiguity models.
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