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Ambiguous events

Amarante, Massimiliano

We focus on a class of Multiple Prior Models. Those characterized by nonatomic countably additive priors. Preferences generating such representations have been recently axiomatized in [17]. We argue that this is the proper setting for comparing the notions of unambiguous event given by Epstein and Zhang in [7] and by Ghirardato, Maccheroni and Marinacci in [10]. The two definitions are known to be nonequivalent. Our main result is that an event T is unambiguous in the sense of Epstein and Zhang if and only if either (i) it is unambiguous in the sense of [10]; or (ii) conditional on T, the decision maker is an expected utility maximizer. We also provide an easy operational criterion for establishing whether or not an event is unambiguous in the sense of Epstein and Zhang.

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Academic Units
Economics
Publisher
Department of Economics, Columbia University
Series
Department of Economics Discussion Papers, 0304-04
Published Here
March 24, 2011

Notes

October 2003

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