On the Smooth Ambiguity Model: A Reply

Peter Klibanoff, Massimo Marinacci and Sujoy Mukerji

No 410, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: We find that Epstein (2010)'s Ellsberg-style thought experiments pose, contrary to his claims, no paradox or difficulty for the smooth ambiguity model of decision making under uncertainty developed by Klibanoff, Marinacci and Mukerji (2005). Not only are the thought experiments naturally handled by the smooth ambiguity model, but our reanalysis shows that they highlight some of its strengths compared to models such as the maxmin expected utility model (Gilboa and Schmeidler (1989)). In particular, these examples pose no challenge to the model's foundations, interpretation of the model as affording a separation of ambiguity and ambiguity attitude or the potential for calibrating ambiguity attitude in the model.

Date: 2011
New Economics Papers: this item is included in nep-hpe and nep-mic
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Journal Article: On the Smooth Ambiguity Model: A Reply (2012)
Working Paper: On the Smooth Ambiguity Model: A Reply (2009)
Working Paper: On the Smooth Ambiguity Model: A Reply (2009)
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