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Objective and subjective rationality and decisions with the best and worst case in mind

Author

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  • Simon Grant

    (Australian National University)

  • Patricia Rich

    (University of Bayreuth)

  • Jack Stecher

    (University of Alberta)

Abstract

We study decision under uncertainty in an Anscombe–Aumann framework. Two binary relations characterize a decision-maker: one (in general) incomplete relation, reflecting her objective rationality, and a second complete relation, reflecting her subjective rationality. We require the latter to be an extension of the former. Our key axiom is a dominance condition. Our main theorem provides a representation of the two relations. The objectively rational relation has a Bewley-style multiple prior representation. Using this set of priors, we fully characterize the subjectively rational relation in terms of the most optimistic and most pessimistic expected utilities.

Suggested Citation

  • Simon Grant & Patricia Rich & Jack Stecher, 2021. "Objective and subjective rationality and decisions with the best and worst case in mind," Theory and Decision, Springer, vol. 90(3), pages 309-320, May.
    • Handle: RePEc:kap:theord:v:90:y:2021:i:3:d:10.1007_s11238-020-09777-x
    DOI: 10.1007/s11238-020-09777-x
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    References listed on IDEAS

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    Cited by:

    1. Mira Frick & Ryota Iijima & Yves Le Yaouanq, 2020. "Objective rationality foundations for (dynamic) alpha-MEU," Cowles Foundation Discussion Papers 2244R, Cowles Foundation for Research in Economics, Yale University, revised Jul 2021.
    2. Frick, Mira & Iijima, Ryota & Le Yaouanq, Yves, 2022. "Objective rationality foundations for (dynamic) α-MEU," Journal of Economic Theory, Elsevier, vol. 200(C).
    3. José Heleno Faro & Ana Santos, 2023. "Updating variational (Bewley) preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(1), pages 207-228, January.
    4. Lorenzo Bastianello & José Heleno Faro & Ana Santos, 2022. "Dynamically consistent objective and subjective rationality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(2), pages 477-504, September.

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