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Almost-objective uncertainty

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  • Mark Machina

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Abstract

Every subjective state space with Euclidean structure contains almost-objective events which arbitrarily closely approximate the properties of objectively uncertain events for all individuals with event-smooth betting preferences - whether or not they are expected utility, state-independent, or probabilistically sophisticated. These properties include unanimously agreed-upon revealed likelihoods, statistical independence from other subjective events, probabilistic sophistication over almost-objective bets, and linearity of state-independent and state-dependent expected utility in almost-objective likelihoods and mixtures. Most physical randomization devices are based on events of this form. Even in the presence of state-dependence, ambiguity, and ambiguity aversion, an individual’s betting preferences over almost-objective events are based solely on their attitudes toward objective risk, and can fully predict (or be predicted from) their behavior in an idealized casino. Copyright Springer-Verlag Berlin/Heidelberg 2004

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 24 (2004)
Issue (Month): 1 (07)
Pages: 1-54

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Handle: RePEc:spr:joecth:v:24:y:2004:i:1:p:1-54

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Related research

Keywords: Subjective uncertainty; Almost-objective uncertainty.;

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Cited by:
  1. ALLARD, Marie & BRONSARD, Camille & GOURIÉROUX Christian, 2003. "Aversion Analysis," Cahiers de recherche 2003-06, Universite de Montreal, Departement de sciences economiques.
    • ALLARD, Marie & BRONSARD, Camille & GOURIÉROUX, Christian, 2003. "Aversion Analysis," Cahiers de recherche 04-2003, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. Nabil I. Al-Najjar & Luca Anderlini & Leonardo Felli, 2006. "Undescribable Events," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 849-868.
  3. Steffen Andersen & John Fountain & Glenn Harrison & Arne Hole & E. Rutström, 2012. "Inferring beliefs as subjectively imprecise probabilities," Theory and Decision, Springer, vol. 73(1), pages 161-184, July.
  4. Attanasi, Giuseppe & Gollier, Christian & Montesano, Aldo & Pace, Noémie, 2012. "Eliciting ambiguity aversion in unknown and in compound lotteries: A KMM experimental approach," IDEI Working Papers 744, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Robert Nau, 2011. "Risk, ambiguity, and state-preference theory," Economic Theory, Springer, vol. 48(2), pages 437-467, October.
  6. Klaus Nehring, 2006. "Decision-Making in the Context of Imprecise Probabilistic Beliefs," Economics Working Papers 0034, Institute for Advanced Study, School of Social Science.
  7. Fujii, Tomoki, 2014. "Dynamic Poverty Decomposition Analysis: An Application to the Philippines," ADBI Working Papers 466, Asian Development Bank Institute.
  8. Soo Chew & Richard Ebstein & Songfa Zhong, 2012. "Ambiguity aversion and familiarity bias: Evidence from behavioral and gene association studies," Journal of Risk and Uncertainty, Springer, vol. 44(1), pages 1-18, February.
  9. Jack Stecher & Radhika Lunawat & Kira Pronin & John Dickhaut, 2007. "Decision Making and Trade without Probabilities," CIRANO Working Papers 2007s-21, CIRANO.
  10. Border, Kim C. & Ghirardato, Paolo & Segal, Uzi, 2005. "Objective subjective probabilities," Working Papers 1228, California Institute of Technology, Division of the Humanities and Social Sciences.
  11. Klaus Nehring, 2006. "Bernoulli Without Bayes: A Theory of Utility-Sophisticated Preferences under Ambiguity," Economics Working Papers 0072, Institute for Advanced Study, School of Social Science.
  12. Zvi Safra & Uzi Segal, 2005. "Are Universal Preferences Possible? Calibration Results for Non-Expected Utility Theories," Boston College Working Papers in Economics 633, Boston College Department of Economics.
  13. Giuseppe Attanasi & Aldo Montesano, 2012. "The price for information about probabilities and its relation with risk and ambiguity," Theory and Decision, Springer, vol. 73(1), pages 125-160, July.
  14. Robert Nau, 2001. "De Finetti was Right: Probability Does Not Exist," Theory and Decision, Springer, vol. 51(2), pages 89-124, December.
  15. Nabil Al-Najjar & Luca Anderlini & Leonardo Felli, 2003. "Undescribable Contingencies," Discussion Papers 1370, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

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