This paper studies the “dual” theory of the smooth ambiguity model introduced by Klibanoff et al. (Econometrica 73:1849–1892, <CitationRef CitationID="CR14">2005</CitationRef>). Unlike the original model, we characterize attitudes toward ambiguity captured by second-order probabilities. First, we give a set of axioms to derive a dual...</citationref>

In this paper, we examine the properties of subjective probabilities induced by optimal expectations. We show that investors who follow optimal expectations underweigh small probabilities and overweigh large probabilities in a simple binary economy. This indicates that the subjective...

This note gives a stochastic dominance representation of more optimistic belief in rank dependent expected utility. Applying this observation, we can demonstrate the effect of more optimistic belief on economic decisions and equilibria under risk making comparative static analysis.