Ambiguity and the Value of Late Resolution of Uncertainty

<jats:p>The paper shows that in a dynamic setting with multiple sources of uncertainty, recursive ambiguity-averse preferences may imply a preference for late resolution of uncertainty. In particular, the simultaneous resolution of two sources can offer hedging benefits that are negated when one source is resolved earlier and uncertainty is evaluated recursively. The paper illustrates the mechanism in a simple dynamic urn problem. In a special case, an equivalent static formulation involving composite bets on two urns suggests a direct experimental test.</jats:p>