Abstract
Ellsberg (1961) introduced the Ellsberg urns experiments as evidence against Savage's theory of subjective expected utility. The restrictive Bayes/Hurwicz criterion (Ellsberg, 2001) is proposed to explain the phenomena of subjects shunning the ambiguous urns. Modeling the interaction between the experimenter and the subject as a game, we find sufficient and necessary conditions for the subject to modify beliefs with the reduced-form criterion. We postulate that diverse ambiguity attitudes result from different perceptions about the payoff structure. As a horse race gambler should adjust his belief after the gambling company publishes new odds, the subject can form different beliefs facing different choice problems. The revealed belief discrepancies can be a result of these modifications, and thus does not violate the Savage axioms about the preferences at the moment of each decision. The ambiguity game interpretation is supported by various neuroscientific and behavioral studies.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
