This paper considers learning when the distinction between risk and ambiguity matters. It first describes thought experiments, dynamic variants of those provided by Ellsberg, that highlight a sense in which the Bayesian learning model is extreme-it models agents who are implausibly ambitious about what they can learn in complicated environments. The paper then provides a generalization of the Bayesian model that accommodates the intuitive choices in the thought experiments. In particular, the model allows decision-makers' confidence about the environment to change-along with beliefs-as they learn. A portfolio choice application compares the effect of changes in confidence under ambiguity vs. changes in estimation risk under Bayesian learning. The former is shown to induce a trend towards more stock market participation and investment even when the latter does not.
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