Publication Date: June 2019
We propose a multiple-prior model of preferences under ambiguity that provides a uniﬁed lens through which to understand diﬀerent formalizations of ambiguity aversion, as well as context-dependent negative and positive ambiguity attitudes documented in experiments. This model, Boolean expected utility (BEU), represents the belief the decision-maker uses to evaluate any uncertain prospect as the outcome of a game between two conflicting forces, Pessimism and Optimism. We prove, ﬁrst, that BEU provides a novel representation of the class of invariant biseparable preferences (Ghirardato, Maccheroni, and Marinacci, 2004). Second, BEU accommodates rich patterns of ambiguity attitudes, which we characterize in terms of the relative power allocated to each force in the game.
Keywords: Multiple priors, Ambiguity aversion
JEL Classification Codes: D81
JEL Classification Codes: D81See CFDP Version(s): CFDP 2180R