We study the relation between ambiguity aversion and the Allais paradox. To this end, we introduce a novel definition of hedging which applies to objective lotteries as well as to uncertain acts, and we use it to define a novel axiom that captures a preference for hedging which generalizes the...

Two of the most well-known regularities observed in preferences under risk and uncertainty are ambiguity aversion and the Allais paradox. We study the behavior of an agent who can display both tendencies at the same time. We introduce a novel notion of preference for hedging that applies to both...

Two of the most well known regularities observed in preferences under risk and uncertainty are ambiguity aversion and the Allais paradox. We study the behav- ior of an agent who can display both tendencies simultaneously. We introduce a novel notion of preference for hedging that applies to both...

We study the relation between ambiguity aversion and the Allais paradox. To this end, we introduce a novel denition of hedging which applies to objective lotteries as well as to uncertain acts, and we use it to dene a novel axiom that captures a preference for hedging which generalizes the one...