Polarization and Ambiguity

S-Tier
Journal: American Economic Review
Year: 2013
Volume: 103
Issue: 7
Pages: 3071-83

Authors (3)

Sandeep Baliga (Northwestern University) Eran Hanany (not in RePEc) Peter Klibanoff (not in RePEc)

Score contribution per author:

2.681 = (α=2.01 / 3 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

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.

Technical Details

RePEc Handle
repec:aea:aecrev:v:103:y:2013:i:7:p:3071-83
Journal Field
General
Author Count
3
Added to Database
2026-01-24