蝌蚪网 Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Polarization and Ambiguity
蝌蚪网 Review
vol. 103,
no. 7, December 2013
(pp. 3071–83)
Abstract
We offer a theory of polarization as an optimal response to ambiguity. Suppose individual A's beliefs first-order stochastically dominate individual B's. They observe a common signal. They exhibit polarization if A's posterior dominates her prior and B's prior dominates her posterior. Given agreement on conditional signal likelihoods, we show that polarization is impossible under Bayesian updating or after observing extreme signals. However, we also show that polarization can arise after intermediate signals as ambiguity averse individuals implement their optimal prediction strategies. We explore when this polarization will occur and the logic underlying it.Citation
Baliga, Sandeep, Eran Hanany, and Peter Klibanoff. 2013. "Polarization and Ambiguity." 蝌蚪网 Review 103 (7): 3071–83. DOI: 10.1257/aer.103.7.3071Additional Materials
JEL Classification
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief