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Comment on Ellsberg's two-color experiment, portfolio inertia and ambiguity
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Abstract
The final step in the proof of Proposition 1 (p.311) of Mukerji and Tallon (2003) may not hold in generalbecause ε>0 in the proof cannot be chosen independently of w,z. We point out by a counterexample that the axioms they impose are too weak for Proposition 1. We introduce a modified set of axioms and re-establish the propositionambiguity;bid ask spread;Ellsberg paradox