Most decisions concerning (self-)insurance and self-protection have to be taken in situations in which a) the effort exerted precedes the moment uncertainty realises, and b) the probabilities of future states of the world are not perfectly known. By integrating these two characteristics in a...

We investigate what it means for one act to be more ambiguous than another. The question is evidently analogous to asking what makes one prospect riskier than another, but beliefs are neither objective nor representable by a unique probability. Our starting point is an abstract class of...

Optimal portfolio rules are derived under uncertainty aversion by formulating the portfolio choice problem as a robust control problem. The robust portfolio rule indicates that the total holdings of risky assets as a proportion of the investor's wealth could increase as compared to the holdings...

The results of an experiment extending Ellsberg's setup demonstrate that attitudes towards ambiguity and compound uncertainty are closely related. However, this association is much stronger when the second layer of uncertainty is subjective than when it is objective. Provided that the compound...

The α-MEU model and the smooth ambiguity model are two popular models in decision making under ambiguity. However, the axiomatic foundations of these two models are not completely understood. We provide axiomatic foundations of these models in a symmetric setting with a product state space...

Since at least de Finetti [7], preference symmetry assumptions have played an important role in models of decision making under uncertainty. In the current paper, we explore (1) the relationship between the symmetry assumption of Klibanoff, Mukerji and Seo (KMS) [21] and alternative symmetry...

We review some of the (theoretical) economic implications of David Schmeidler's models of decision under uncertainty (Choquet expected utility and maxmin expected utility) in competitive market settings. We start with the portfolio inertia result of Dow and Werlang (1992), show how it does or...

This paper studies the optimal extraction of a non-renewable resource under uncertainty using a discrete-time approach in the spirit of the literature on precautionary savings. We find that boundedness of the utility function, in particular the assumption about U(0), gives very different results...

The Allais critique of expected utility theory (EUT) has led to the development of theories of choice under risk that relax the independence axiom, but which adhere to the conventional axioms of ordering and monotonicity. Unlike many existing labora-tory experiments designed to test...

We develop a nonparametric procedure, called the lattice method, for testing the consistency of contingent consumption data with a broad class of models of choice under risk and under uncertainty. Our method allows for risk loving and elation seeking behavior and can be used to calculate, via...