In this paper, we establish an axiomatically founded generalized recursive smooth ambiguity model that allows for a separation among intertemporal substitution, risk aversion, and ambiguity aversion. We axiomatize this model using two approaches: the second-order act approach à la Klibanoff,...

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...

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 report an experiment where each subject's ambiguity sensitivity is measured by an ambiguity premium, a concept analogous to and comparable with a risk premium. In our design, some tasks feature known objective risks and others uncertainty about which subjects have imperfect, heterogeneous,...

This paper introduces changes in the level of ambiguity as a complementary source of time-varying risk aversion. We show in a consumption-based asset pricing model with simultaneously risky and ambiguous assets that a rise in the level of ambiguity raises investors' risk aversion. The effect is...

We report an experiment where each subject's ambiguity sensitivity is measured by an ambiguity premium, a concept analogous to and comparable with a risk premium. In our design, some tasks feature known objective risks and others uncertainty about which subjects have imperfect, heterogeneous,...

This paper analyses the formation of international environmental agreements (IEAs) under uncertainty, focusing on the role of learning and risk aversion. It bridges two strands of literature: one focused on the role learning for the success of IEA formation when countries are risk neutral and...

This paper demonstrates gender differences in risk aversion and ambiguity aversion. It also contributes to a growing literature relating economic preference parameters to psychological measures by asking whether variations in preference parameters among persons, and in particular across genders,...

Companies are increasingly adopting Artificial Intelligence (AI) today. Recently however debates started over the risk of human cognitive biases being replicated (and scaled) by AI. Research on biases in AI predicting consumer choice is incipient and focuses on observable biases. We provide a...

We analyze the effect of ambiguous loss probabilities on competitive insurance markets with asymmetric information. We characterize equilibria under actuarially fair pricing with preferences that are second-order ambiguity averse (have smooth indifference curves). We also show existence of...