A belief-based definition of ambiguity aversion
This paper proposes a notion of ambiguity aversion and characterizes it in the context of biseparable preferences, which include many popular ambiguity models in the literature. The defined properties suggest that ambiguity aversion is characterized by the properties of its capacity. This formalizes a sharp distinction between ambiguity and risk aversion, where risk aversion is characterized by the properties of its utility index and its probability weighting function.
KeywordsAmbiguity aversion Biseparable preference Maxmin expected utility Choquet expected utility
JEL ClassificationD80 D81
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