Differentiating Ambiguity: A Comment.
Paper number: 06/06
Paper date: 17 August, 2005
Paper Category: Working Paper
Jurgen Eichberger, Simon Grant and David Kelsey
In  Ghirardato, Macheroni and MArcinaccri (GMM) propose a method for distinguishing between percieved ambiguity and the decision-maker's reaction to it. They study a general class of preferences which includes CEU and α-MEU and axiomatise a subclass of α-MEU preferences. We show that for Hurwicz preferences the proposed measure of ambiguity depends on parameters which intuitively reflect ambiguity-attitude. Furthermore, any α-MEU preferences which satisfy the CEU axioms, satisfy GMM's axioms if and only if α = 0 or 1, that is, the capacity must be convex or concave