Signaling Probabilities in Ambiguity: On the Impact of Vague News

A framework for the analysis of self-confirming policies

“…A possibility is to require the distortion functions featured by prospect theory (for gains and losses) to affect a specific model in . An alternative route is to consider “smooth ambiguity like” versions of prospect theory à la Vinogradov ( 2013 ), and require the equilibrium prior to be supported on (this yields the previous approach if the decision maker’s prior is a Dirac measure at some point in ). In any case, the problem definitely deserves more attention, and presents an avenue for future research.…”