Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315628 
Authors: 
Year of Publication: 
2024
Citation: 
[Journal:] Theory and Decision [ISSN:] 1573-7187 [Volume:] 97 [Issue:] 3 [Publisher:] Springer US [Place:] New York [Year:] 2024 [Pages:] 423-453
Publisher: 
Springer US, New York
Abstract: 
Abstract This paper presents a new representation of preference orderings for the study of ambiguity-related decision-making. The central feature is a preference-based decomposition of subjective probabilities that provides information about inherent ambiguity. The probability decomposition is combined with a utility function reflecting the decision-maker’s attitude toward ambiguity. The proposed theory generalizes Savage’s SEU and allows for a straightforward measurement of ambiguity and ambiguity aversion while keeping concepts for measuring risk and risk attitudes unaffected. For the measurement of ambiguity, concepts of probability theory can be used since decision acts can be interpreted as two-dimensional probability distributions. The proposed measure of ambiguity aversion exploits the properties of the utility function in the same way as the Arrow/Pratt measure of risk aversion.
Subjects: 
Ambiguity
Knightian uncertainty
Subjective probability
Ambiguity aversion
Persistent Identifier of the first edition: 
Additional Information: 
D81
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version
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