DISCUSSION PAPER SERIES ON THE SMOOTH AMBIGUITY MODEL: A REPLY

We nd that Epstein (2010)s Ellsberg-style thought experiments pose, contrary to his claims, no paradox or di ¢ culty for the smooth ambiguity model of decision making under uncertainty developed by Klibano¤, Marinacci and Mukerji (2005). Not only are the thought experiments naturally handled by the smooth ambiguity model, but our reanalysis shows that they highlight some of its strengths compared to models such as the maxmin expected utility model (Gilboa and Schmeidler, 1989). In particular, these examples pose no challenge to the models foundations, interpretation of the model as a¤ording a separation of ambiguity and ambiguity attitude or the potential for calibrating ambiguity attitude in the model. JEL Classi\u85cation Numbers: D800, D810