A Note on Comparative Ambiguity Aversion and Justifiability. Issue 5 (September 2016)

• Record Type: Journal Article
• Authors: Battigalli, P.; Cerreia‐Vioglio, S.; Maccheroni, F.; Marinacci, M.
• Is Part Of: Econometrica. Volume 84:Issue 5(2016:Sep.)
• Page Start: 1903
• Page End: 1916
• Publication Date: 2016-09
• Subjects: Comparative ambiguity aversion -- justifiability -- rationalizability; Econometrics -- Periodicals; Economics, Mathematical -- Periodicals; Economics -- Periodicals; Économétrie -- Périodiques; Mathématiques économiques -- Périodiques; Économie politique -- Périodiques; 330.05
• DOI: 10.3982/ECTA14429
• Languages: English
• ISSNs: 0012-9682

Abstract

Abstract : We consider a decision maker who ranks actions according to the smooth ambiguity criterion of Klibanoff, Marinacci, and Mukerji (2005). An action is justifiable if it is a best reply to some belief over probabilistic models. We show that higher ambiguity aversion expands the set of justifiable actions. A similar result holds for risk aversion. Our results follow from a generalization of the duality lemma of Wald (1949) and Pearce (1984).