Economics Dictionary of Arguments

Home Screenshot Tabelle Begriffe

 
Ellsberg paradox: The Ellsberg paradox is a paradox in decision theory in which people's decisions are inconsistent with subjective expected utility theory. The paradox was first described by Daniel Ellsberg in 1961. See also Decision theory, Knowledge, Utility theory.
_____________
Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments.

 
Author Concept Summary/Quotes Sources

Stuart J. Russell on Ellsberg Paradox - Dictionary of Arguments

Norvig I 620
Ellsberg Paradox/ambiguity/irrationality/rationality/Norvig/Russell: Here the prizes are fixed, but the probabilities are underconstrained. Your payoff will depend on the color of a ball chosen from an urn. You are told that the urn contains 1/3 red balls, and 2/3 either black or yellow balls, but you don’t know how many black and how many yellow.
Again, you are asked whether you prefer lottery A or B; and then C or D: A: $100 for a red ball C: $100 for a red or yellow ball B: $100 for a black ball D: $100 for a black or yellow ball. It should be clear that if you think there are more red than black balls then you should prefer A over B and C over D; if you think there are fewer red than black you should prefer the opposite.
But it turns out that most people prefer A over B and also prefer D over C, even though there is no state of the world for which this is rational. It seems that people have ambiguity aversion: A gives you a 1/3 chance of winning, while B could be anywhere between 0 and 2/3. Similarly, D gives you a 2/3 chance, while C could be anywhere between 1/3 and 3/3. Most people elect the known probability rather than the unknown unknowns.
>Allais paradox/Norvig
, >Rationality/AI research, >Certainty effect/Kahneman/Tversky, >Utility/AI research.
Ambiguity aversion: It seems that people have ambiguity aversion: A gives you a 1/3 chance of winning, while B could be anywhere between 0 and 2/3. Similarly, D gives you a 2/3 chance, while C could be anywhere between 1/3 and 3/3. Most people elect the known probability rather than the unknown unknowns.
Norvig I 638
The Ellsberg paradox on ambiguity aversion was introduced in the Ph.D. thesis of Daniel Ellsberg (Ellsberg, 1962)(1), (…).Fox and Tversky (1995)(2) describe a further study of ambiguity aversion. Mark Machina (2005)(3) gives an overview of choice under uncertainty and how it can vary from expected utility theory.

1. Ellsberg, D. (1962). Risk, Ambiguity, and Decision. Ph.D. thesis, Harvard University.
2. Fox, C. and Tversky, A. (1995). Ambiguity aversion and comparative ignorance. Quarterly Journal of Economics, 110(3), 585–603.
3. Machina, M. (2005). Choice under uncertainty. In Encyclopedia of Cognitive Science, pp. 505–514.
Wiley.

_____________
Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.

Russell I
B. Russell/A.N. Whitehead
Principia Mathematica Frankfurt 1986

Russell II
B. Russell
The ABC of Relativity, London 1958, 1969
German Edition:
Das ABC der Relativitätstheorie Frankfurt 1989

Russell IV
B. Russell
The Problems of Philosophy, Oxford 1912
German Edition:
Probleme der Philosophie Frankfurt 1967

Russell VI
B. Russell
"The Philosophy of Logical Atomism", in: B. Russell, Logic and KNowledge, ed. R. Ch. Marsh, London 1956, pp. 200-202
German Edition:
Die Philosophie des logischen Atomismus
In
Eigennamen, U. Wolf (Hg), Frankfurt 1993

Russell VII
B. Russell
On the Nature of Truth and Falsehood, in: B. Russell, The Problems of Philosophy, Oxford 1912 - Dt. "Wahrheit und Falschheit"
In
Wahrheitstheorien, G. Skirbekk (Hg), Frankfurt 1996

Norvig I
Peter Norvig
Stuart J. Russell
Artificial Intelligence: A Modern Approach Upper Saddle River, NJ 2010


Send Link
> Counter arguments against Russell
> Counter arguments in relation to Ellsberg Paradox

Authors A   B   C   D   E   F   G   H   I   J   K   L   M   N   O   P   Q   R   S   T   U   V   W   Z  


Concepts A   B   C   D   E   F   G   H   I   J   K   L   M   N   O   P   Q   R   S   T   U   V   W   Z