Evidence of aversion to ambiguity

The Ellsberg paradox is a paradox in decision theory in which people’s choices violate the postulates of subjective expected utility.[1] It is generally taken to be evidence for ambiguity aversion. The paradox was popularized by Daniel Ellsberg, although a version of it was noted considerably earlier by John Maynard Keynes.[2]

The basic idea is that people overwhelmingly prefer taking on risk in situations where they know specific odds rather than an alternate risk scenario in which the odds are completely ambiguous—even when mathematically the odds are identical.[3][unreliable source?] That is, given a choice of risks to take (such as bets), people “prefer the devil they know” rather than assuming a risk where odds are difficult or impossible to calculate.[4]

Ellsberg actually proposed two separate thought experiments, the proposed choices which contradict subjective expected utility. The 2-color problem involves bets on two urns, both of which contain balls of two different colors. The 3-color problem, described below, involves bets on a single urn, which contains balls of three different colors.

Generality of the paradox

Note that the result holds regardless of your utility function. Indeed, the amount of the payoff is likewise irrelevant. Whichever gamble you choose, the prize for winning it is the same, and the cost of losing it is the same (no cost), so ultimately, there are only two outcomes: you receive a specific amount of money, or you receive nothing.

A modification of utility theory to incorporate uncertainty as distinct from risk is Choquet expected utility, which also proposes a solution to the paradox.
Alternative explanations

Other alternative explanations include the competence hypothesis [7] and comparative ignorance hypothesis.[5] These theories attribute the source of the ambiguity aversion to the participant’s pre-existing knowledge.

Allais paradox
Ambiguity aversion

Subjective expected utility
Utility theory

References

Jump up ^ Ellsberg, Daniel (1961). “Risk, Ambiguity, and the Savage Axioms”. Quarterly Journal of Economics 75 (4): 643–669. doi:10.2307/1884324. JSTOR 1884324.

Schmeidler, D. (1989). “Subjective Probability and Expected Utility without Additivity”. Econometrica 57 (3): 571–587. doi:10.2307/1911053. JSTOR 1911053. edit

Categories:

Economics paradoxes
Economics of uncertainty
Decision theory
Decision theory paradoxes
Utility
Statistical paradoxes
Paradoxes

Collective retreat from society, prologue

The term me decade was coined by novelist Tom Wolfe in New York magazine in August 1976, describing the new American preoccupation with self-awareness and the collective retreat from history, community, and human reciprocity. The term seemed to de-scribe the age so aptly that it quickly became commonly associated with the 1970s. Compared to the 1960s, Americans in the 1970s were self-absorbed and passive. Americans turned from street theater to self-therapy, from political activism to psychological analysis. Everyone, it seemed, had an analyst, adviser, guru, genie, prophet, priest, or spirit. In the 1970s the only way many Americans could relate to one another was as members of a national therapy group.

Kurt Vonnegut - The Shapes of Stories

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FINALE (EGRESS)

Poetry in motion #poemofday

I Am Whatever I Choose To Become

Eyes Acrylic Print By Mikial Millard

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Engulf me in your flaming eyes
Taste me with the lips of your soul
Have me forever until this universe is burned down

Die with me in bliss
Live with me through pain that is pleasure

Feel my finger tips press against yours as we have one Final dance of sensuality.

** Egress poem structure is first two lines 8 syllables each, third line 14. The last three lines are free versed.
-Egress created by Mikial Millard
By Mikial Kenneth Millard
Copyright Feb 2014
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What exactly is a mojo filter?

By now, almost four decades into his fandom, he has the Stones figured out pretty thoroughly. Jimmy Miller, the producer behind the band’s incredible late-Sixties/early-Seventies run, from Beggars Banquet to Exile, helped the band navigate “away from the dead-end shoals of instantly dated psychedelia and fey hippie anthems, and restored their original bluesy swagger,” he writes. “On ‘Jumpin’ Jack Flash,’ the band sounds primal, intuitive and uninhibited. What the hell is a ‘jumpin’ jack flash,’ or a ‘crossfire hurricane’? We don’t know for sure, but then, what precisely is ‘smokestack lightning’ [or] a ‘mojo filter?’ Who the hell cares?”

Read more: http://www.rollingstone.com/music/news/author-traces-the-rolling-stones-story-in-50-songs-20130723#ixzz2tRqnGeww
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