Ambiguity made precise: a comparative foundation

Abstract

In this chapter we propose and characterize a formal definition of ambiguity aversion for a class of preference models which encompasses the most popular models developed to allow ambiguity attitude in decision making. Using this notion, we define and characterize ambiguity of events for ambiguity averse or loving preferences. Our analysis is based on a fully “subjective” framework with no extraneous devices (like a roulette wheel, or a rich set of exogenously “unambiguous” events). This yields a definition that can be fruitfully usedwith any preference in the mentioned class, though it imposes a limitation in the definition’s ability of distinguishing “real” ambiguity aversion from other behavioral traits that have been observed experimentally.

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