Perceived Ambiguity and Relevant Measures

Peter Klibanoff, Sujoy Mukerji and Kyoungwon Seo

Econometrica, 2014, vol. 82, issue 5, 1945-1978

Abstract: We axiomatize preferences that can be represented by a monotonic aggregation of subjective expected utilities generated by a utility function and some set of i.i.d. probability measures over a product state space, S∞. For such preferences, we define relevant measures, show that they are treated as if they were the only marginals possibly governing the state space, and connect them with the measures appearing in the aforementioned representation. These results allow us to interpret relevant measures as reflecting part of perceived ambiguity, meaning subjective uncertainty about probabilities over states. Under mild conditions, we show that increases or decreases in ambiguity aversion cannot affect the relevant measures. This property, necessary for the conclusion that these measures reflect only perceived ambiguity, distinguishes the set of relevant measures from the leading alternative in the literature. We apply our findings to a number of well‐known models of ambiguity‐sensitive preferences. For each model, we identify the set of relevant measures and the implications of comparative ambiguity aversion.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
https://doi.org/10.3982/ECTA9872

Related works:
Journal Article: Perceived Ambiguity and Relevant Measures (2014)
Working Paper: Perceived Ambiguity and Relevant Measures (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:emetrp:v:82:y:2014:i:5:p:1945-1978

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido W. Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().