Ambiguity Aversion with Three or More Outcomes
- (pp. 3814-40)
Abstract
Ambiguous choice problems which involve three or more outcome values can reveal aspects of ambiguity and ambiguity aversion which cannot be displayed in the classic two-outcome Ellsberg urn problems, and hence are not always captured by models designed to accommodate them. These aspects include Allais-type preferences over purely subjective acts, attitudes toward different sources involving different amounts of ambiguity, and attitudes toward ambiguity at different outcome levels. This paper presents a few such examples, and examines the standard models' predictions and performance in such cases. (JEL D81)Citation
Machina, Mark J. 2014. "Ambiguity Aversion with Three or More Outcomes." American Economic Review, 104 (12): 3814-40. DOI: 10.1257/aer.104.12.3814Additional Materials
JEL Classification
- D81 Criteria for Decision-Making under Risk and Uncertainty