English, Article, Journal or magazine article edition: Ellsberg`s 2-Color Experiment, Bid-Ask Behavior and Ambiguity Sujoy Mukerji; Jean-Marc Tallon

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Bookmark: http://trove.nla.gov.au/version/21108
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Ellsberg`s 2-Color Experiment, Bid-Ask Behavior and Ambiguity
Author
  • Sujoy Mukerji
  • Jean-Marc Tallon
Physical Description
  • preprint
Notes
  • Results in this note relate the observation of an interval of prices at which a DM strictly prefers to hold a zero position on an asset (termed `bid-ask behavior`) to the DM`s perception of the underlying payoff relevant events as ambiguous, as the term is defined in Epstein and Zhang (2001). The connection between bid-ask behavior and ambiguity is established without invoking a parametric preference form, such as the Choquet expected utility or the max-min multiple priors model. This allows us to draw an observable distinction between bid-ask behavior that may arise purely due to first-order risk aversion type effects, such as those which could arise even if preferences were probabilistically sophisticated, and the bid-ask behavior that involve ambiguity perceptions.
  • Ellsberg Paradox, bid-ask spread, testing for ambiguity aversion, uncertainty aversion, unforeseen cointingencies, subjective state spaces.
  • RePEc:oxf:wpaper:114
Language
  • English
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