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Wiley InterScience | |||
  Review of Economic StudiesVolume 75 Issue 1, Pages 3 - 28 Published Online: 7 Dec 2007 © 2010 The Review of Economic Studies Limited
Abstract | References | Full Text: HTML, PDF (Size: 234K) | Related Articles | Citation Tracking  Ambiguity Without a State Space Copyright 2008 The Review of Economic Studies Limited ABSTRACTMany decisions involve both imprecise probabilities and intractable states of the world. Objective expected utility assumes unambiguous probabilities; subjective expected utility assumes a completely specified state space. This paper analyses a third domain of preference: sets of consequential lotteries. Using this domain, we develop a theory of objective ambiguity without explicit reference to any state space. We characterize a representation that integrates a non-linear transformation of first-order expected utility with respect to a second-order measure. The concavity of the transformation and the weighting of the measure capture ambiguity aversion. We propose a definition for comparative ambiguity aversion. First version received December 2005; final version accepted July 2007 (Eds.) | 
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