infonet-economy

This paper investigates the notion of changes in ambiguity over loss probabilities in the smooth ambiguity model developed by Klibano, Marinacci and Mukerji (2005). Changes in ambiguity over loss probabilities are expressed through the specific concept of stochastic dominance of order n de…ned by Ekern (1980). We characterize conditions on the function capturing attitudes towards ambiguity under which an individual always considers one situation to be more ambiguous than another in a model of two states of nature. We propose an intuitive interpretation of the properties of this function in terms of preferences for harms disaggregation over probabilities, also labelled ambiguity apportionment.