The α-MEU model: A comment

In Ghirardato et al. (2004) [7], Ghirardato, Macheroni and Marinacci propose a method for distinguishing between perceived ambiguity and the decision-maker's reaction to it. They study a general class of preferences which they refer to as invariant biseparable. This class includes CEU and MEU. They axiomatize a subclass of alpha-MEU preferences. If attention is restricted to finite state spaces, we show that any alpha-MEU preference relation, satisfies GMM's axioms if and only if alpha = 0 or 1, that is, the preferences must be either maxmin or maxmax. We show by example that these axioms may be satisfied when the state space is [0,1]. (C) 2011 Elsevier Inc. All rights reserved.