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On the Smooth Ambiguity Model: A Reply, Econometrica

Abstract

We find that Epstein (2010)'s Ellsberg-style thought experiments pose, contrary to his claims, no paradox or difficulty for the smooth ambiguity model of decision making under uncertainty developed by Klibanoff, Marinacci and Mukerji (2005). Not only are the thought experiments naturally handled by the smooth ambiguity model, but our reanalysis shows that they highlight some of its strengths compared to models such as the maxmin expected utility model (Gilboa and Schmeidler, 1989). In particular, these examples pose no challenge to the model's foundations, interpretation of the model as affording a separation of ambiguity and ambiguity attitude or the potential for calibrating ambiguity attitude in the model.

Type

Article

Author(s)

Peter Klibanoff, Massimo Marinacci, Sujoy Mukerji

Date Published

2012

Citations

Klibanoff, Peter, Massimo Marinacci, and Sujoy Mukerji. 2012. On the Smooth Ambiguity Model: A Reply. Econometrica. 80(3): 1303-1321.

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