Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/184779
Authors: 
Jewitt, Ian
Mukerji, Sujoy
Year of Publication: 
2017
Series/Report no.: 
Working Paper 828
Abstract: 
We investigate what it means for one act to be more ambiguous than another. The question is evidently analogous to asking what makes one prospect riskier than another, but beliefs are neither objective nor representable by a unique probability. Our starting point is an abstract class of preferences constructed to be (strictly) partially ordered by a more ambiguity averse relation. First, we define two notions of more ambiguous with respect to such a class. A more ambiguous (I) act makes an ambiguity averse decision maker (DM) worse off but does not affect the welfare of an ambiguity neutral DM. A more ambiguous (II) act adversely affects a more ambiguity averse DM more, as measured by the compensation they require to switch acts. Unlike more ambiguous (I), more ambiguous (II) does not require indifference of ambiguity neutral elements to the acts being compared. Second, we implement the abstract definitions to characterize more ambiguous (I) and (II) for two explicit preference families: a maxmin expected utility and smooth ambiguity. Thirdly, we give applications to the comparative statics of more ambiguous in a standard portfolio problem and a consumption-saving problem.
Subjects: 
Ambiguity
Uncertainty
Knightian Uncertainty
Ambiguity Aversion
Uncertainty aversion
Ellsberg paradox
Comparative statics
Single-crossing
More ambiguous
Portfolio choice
JEL: 
C44
D80
D81
G11
Document Type: 
Working Paper
Social Media Mentions:

Files in This Item:
File
Size
3.31 MB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.