The main attraction of the Smooth Ambiguity Preferences model is its tractability.
The numerical example above suggests that calculations may involve simple adapta-
tions of familiar expected utility analysis. As further evidence, KMM show that con-
cavity of the second-order utility function φ(·) corresponds to a notion of “ambiguity
aversion” which implies Schmeidler’s Uncertainty Aversion Axiom (although their
notion is defined in terms of second-order beliefs, and hence subject to the preceding
qualifications).
13.5.5 Ergin and Gul’s Issue-Preference Model
Ergin and Gul (2009) propose a variant of ...
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