important models of ambiguity and ambiguity aversion. Sections 13.6 and 13.7 present
some recent developments in the field, and Section 13.8 concludes.
13.2 EARLY NOTIONS OF SUBJECTIVE UNCERTAINTY AND AMBIGUITY
13.2.1 Knight’s Distinction
It is often asserted that the distinction between situations of probabilistic and nonproba-
bilistic beliefs was first made by Frank Knight (1921), in his use of the terms “risk”
versus “uncertainty.” However, as LeRoy and Singell (1987) have convincingly demon-
strated, Knight’s distinction between “risk” and “uncertainty” did not refer to the exis-
tence/absence of ...
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