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Ellsberg`s 2-Color Experiment, Bid-Ask Behavior and Ambiguity.

Abstract:

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 ...

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Publisher:
Department of Economics (University of Oxford)
Series:
Discussion paper series
Publication date:
2002-01-01
Language:
English
UUID:
uuid:8f9593a9-45cf-44dc-8fa0-08c788e25395
Local pid:
ora:1151
Deposit date:
2011-08-16

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