Foundations of ambiguity models under symmetry: α-MEU and smooth ambiguity

Peter Klibanoff, Sujoy Mukerji, Kyoungwon Seo and Lorenzo Stanca

Journal of Economic Theory, 2022, vol. 199, issue C

Abstract: The α-MEU model and the smooth ambiguity model are two popular models in decision making under ambiguity. However, the axiomatic foundations of these two models are not completely understood. We provide axiomatic foundations of these models in a symmetric setting with a product state space S∞. This setting allows marginals over S to be linked behaviorally with (limiting frequency) events. Bets on such events are shown to reveal the i.i.d. measures that are relevant for the decision maker's preferences and appear in the representations. By characterizing both models within a common framework, it becomes possible to better compare and relate them.

Keywords: Symmetry; Beliefs; Ambiguity; Multiple priors; Smooth ambiguity (search for similar items in EconPapers)
JEL-codes: D01 D80 D81 D83 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Foundations of ambiguity models under symmetry: α-MEU and smooth ambiguity (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:199:y:2022:i:c:s0022053121000193

DOI: 10.1016/j.jet.2021.105202

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