Symposium on Risk and Ambiguity

Journal of Risk and Uncertainty

, Volume 5, Issue 4, pp 325-370

First online:

Recent developments in modeling preferences: Uncertainty and ambiguity

  • Colin CamererAffiliated withGraduate School of Business, University of Chicago
  • , Martin WeberAffiliated withLehrstuhl fur Allg. Betriebswirtschaftslehre und Entscheidungsforschung, Christian-Albrechts-Universitat

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In subjective expected utility (SEU), the decision weights people attach to events are their beliefs about the likelihood of events. Much empirical evidence, inspired by Ellsberg (1961) and others, shows that people prefer to bet on events they know more about, even when their beliefs are held constant. (They are averse to ambiguity, or uncertainty about probability.) We review evidence, recent theoretical explanations, and applications of research on ambiguity and SEU.

Key words

ambiguity uncertainty Ellsberg paradox nonexpected utility