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Belief hedges: Measuring ambiguity for all events and all models
Journal article   Open access   Peer reviewed

Belief hedges: Measuring ambiguity for all events and all models

Aurélien Baillon, Han Bleichrodt, Chen Li and Peter P. Wakker
Journal of Economic Theory
01/12/2021

Abstract

Subjective beliefs Ambiguity aversion Ellsberg paradox Sources of uncertainty
We introduce belief hedges, i.e., sets of events whose uncertain subjective beliefs neutralize each other. Belief hedges allow us to measure ambiguity attitudes without knowing those subjective beliefs. They lead to improved ambiguity indexes that are valid under all popular ambiguity theories. Our indexes can be applied to real-world problems and do not require expected utility for risk or commitments to two-stage optimization, thereby increasing their descriptive power. Belief hedges make ambiguity theories widely applicable.
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Open Access CC BY V4.0
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https://doi.org/10.1016/j.jet.2021.105353View
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Collaboration types
Domestic collaboration
Citation topics
6 Social Sciences
6.122 Economic Theory
6.122.1287 Risk Preferences
Web of Science research areas
Economics
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