 Calibrated uncertaintyFaruk Gul and Wolfgang Pesendorfer Journal of Economic Theory, 2020, vol. 188, issue C Abstract: We define a binary relation (qualitative uncertainty assessment) that describes the shared likelihood assessments of decision makers with diverse ambiguity attitudes. Ambiguity renders this binary relation incomplete. Our axioms yield a representation according to which A is more likely than B if and only if a capacity, called uncertainty measure, assigns a higher value to A than to B and a higher value to B-complement than to A-complement. Agents combine this uncertainty perception with their uncertainty attitude to form a complete ranking of bets. We provide a representation theorem for this extended model, show that its parameters are uniquely identified and characterize a new measure of comparative ambiguity aversion. For general acts, we modify Machina and Schmeidler's (1992) sophistication axiom to allow for ambiguity and analyze three nested extensions: first, we axiomatize a minimal extension which reduces to expected utility when there is no ambiguity; the second and third extensions show how non-expected utility theories can be accommodated in our framework. Keywords: Ambiguity; Separation of ambiguity perception and ambiguity attitude; Ambiguity measure (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:188:y:2020:i:c:s0022053120300211 DOI: 10.1016/j.jet.2020.105016 Access Statistics for this article Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell More articles in Journal of Economic Theory from Elsevier |
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