Skip to main content

Please enter a keyword and click the arrow to search the site

Ambiguity aversion, games against nature, and dynamic consistency

Journal

Games and Economic Behavior

Subject

Economics

Authors / Editors

Ozdenoren E;Peck J

Biographies

Publication Year

2008

Abstract

Several papers, adopting an axiomatic approach to study decision making under ambiguity aversion, have produced conflicting predictions about how decision makers would behave in simple dynamic urn problems. We explore the concepts of ambiguity aversion and dynamic consistency, with examples of dynamic games against nature. Basically, a malevolent nature puts balls into the urn, and a fair nature draws them out. Depending on the game, various choices that seem inconsistent with static notions of ambiguity aversion or dynamic consistency are consistent with subgame perfection. In the dynamic 3-color Ellsberg urn problem with 30 red balls and 60 blue or green balls, the decision maker could strictly prefer to bet on blue–green at time 0, and to switch to red–green after learning that the ball is not green.

Keywords

Ambiguity aversion; Uncertainty aversion; Dynamic consistency; Ellsberg; Malevolent nature

Available on ECCH

No


Select up to 4 programmes to compare

Select one more to compare
×
subscribe_image_desktop 5949B9BFE33243D782D1C7A17E3345D0

Sign up to receive our latest news and business thinking direct to your inbox

×

Sign up to receive our latest course information and business thinking

Leave your details above if you would like to receive emails containing the latest thought leadership, invitations to events and news about courses that could enhance your career. If you would prefer not to receive our emails, you can still access the case study by clicking the button below. You can opt-out of receiving our emails at any time by visiting: https://london.edu/my-profile-preferences or by unsubscribing through the link provided in our emails. View our Privacy Policy for more information on your rights.