A Framework That Allows For Ambiguity Preferences
Smooth ambiguity preferences are represented as:
- s ∈ S set of contingencies or states
- πθ is a probability distribution over S
- f is an “act” yielding state contingent payoffs f (s)
- u is a von Neumann-Morgenstern utility function and represents risk attitude
- φ maps expected utilities and represents ambiguity attitude
- Ambiguity attitude is summarized using measure similar to absolute risk aversion, only absolute ambiguity aversion:
- μ is a subjective probability over θ ∈ Θ; Represents the ambiguous belief – it summarizes the decision-maker’s subjective uncertainty about the “true” πθ, probability distribution over contingencies. (Collar, 2008)
Read more about this topic: Ambiguity Aversion
Famous quotes containing the words framework, ambiguity and/or preferences:
“Most young black females learn to be suspicious and critical of feminist thinking long before they have any clear understanding of its theory and politics.... Without rigorously engaging feminist thought, they insist that racial separatism works best. This attitude is dangerous. It not only erases the reality of common female experience as a basis for academic study; it also constructs a framework in which differences cannot be examined comparatively.”
—bell hooks (b. c. 1955)
“Unlike the ambiguity of life, the ambiguity of language does reach a limit.”
—Mason Cooley (b. 1927)
“This is the great truth life has to teach us ... that gratification of our individual desires and expression of our personal preferences without consideration for their effect upon others brings in the end nothing but ruin and devastation.”
—Hortense Odlum (1892–?)