Ambiguity Made Precise: A Comparative Foundation

There is no doubt that the subjective expected utility (SEU) theory of decision making under uncertainty of Savage (1954) is solidly established as the choice-theoretic underpinning of modern economic theory. However, Ellsberg (1961)'s famous thought experiment shows that SEU cannot take into account the possibility that the information a decision maker (DM) has about some uncertain event (that is relevant to her choice) be vague or imprecise, and that such "ambiguity" might affect her behavior.

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