First-Order and Second-Order Ambiguity Aversion

• 成果类型: Article
• 署名作者: Lang, Matthias
• 署名单位: Free University of Berlin; Max Planck Society; Leibniz Association; Ifo Institut
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2016.2443
• 发表日期: 2017
• 页码: 1254-1269
• 关键词: Ambiguity; Uncertainty aversion; Smooth ambiguity aversion; subjective beliefs; kinked preferences

摘要

Different models of uncertainty aversion imply strikingly different economic behavior. The key to understanding these differences lies in the dichotomy between first-order and second-order ambiguity aversion, which I define here. My definition and its characterization are independent of specific representations of decisions under uncertainty. I showthat with second-order ambiguity aversion, a positive exposure to ambiguity is optimal if and only if there is a subjective belief such that the act's expected outcome is positive. With first-order ambiguity aversion, zero exposure to ambiguity can be optimal. Examples in finance, insurance, and contracting demonstrate the economic relevance of this dichotomy.