17.7 Beyond uncertainty aversion
The uncertainty averse models that we just reviewed originate in Schmeidler (1989). For our setup is especially relevant his insight about preference for randomization as an hedge toward ambiguity. We now present two different approaches toward ambiguity, due to Bewley (1986) and Klibanoff et al. (2005), that do not rely on this assumption.
Completeness of preferences requires that decision makers have enough information to rank all mixed actions. Under uncertainty, however, decision makers might well lack this information so that they might be unable to compare some pairs of alternatives.
This motivated Truman Bewley to present in 1986 a model of choice under uncertainty that restricts ...