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Rational preferences under ambiguity

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  • Simone Cerreia-Vioglio

    ()

  • Paolo Ghirardato

    ()

  • Fabio Maccheroni

    ()

  • Massimo Marinacci

    ()

  • Marciano Siniscalchi

    ()

Abstract

This paper analyzes preferences in the presence of ambiguity that are rational in the sense of satisfying the classical ordering condition as well as monotonicity. Under technical conditions that are natural in an Anscombe-Aumann environment, we show that even for such general preference model it is possible to identify a set of priors, as first envisioned by Ellsberg (1961). We then discuss ambiguity attitudes, as well as unambiguous acts and events, for the class of rational preferences we consider.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 48 (2011)
Issue (Month): 2 (October)
Pages: 341-375

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Handle: RePEc:spr:joecth:v:48:y:2011:i:2:p:341-375

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Related research

Keywords: Rational preferences; Ambiguity; Unambiguous acts and events; D81;

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References

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  1. Cerreia-Vioglio, S. & Maccheroni, F. & Marinacci, M. & Montrucchio, L., 2011. "Uncertainty averse preferences," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1275-1330, July.
  2. Kopylov, Igor, 2007. "Subjective probabilities on "small" domains," Journal of Economic Theory, Elsevier, vol. 133(1), pages 236-265, March.
  3. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2004. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Carlo Alberto Notebooks 12, Collegio Carlo Alberto, revised 2006.
  4. Ghirardato, Paolo & Maccheroni, Fabio & Marinacci, Massimo, 2004. "Differentiating ambiguity and ambiguity attitude," Journal of Economic Theory, Elsevier, vol. 118(2), pages 133-173, October.
  5. Epstein, L.G. & Zhang, J., 1998. "Subjective Probabilities on Subjectivity Unambiguous Event," RCER Working Papers 456, University of Rochester - Center for Economic Research (RCER).
  6. Tomasz Strzalecki, . "Probabilistic Sophistication and Variational Preferences," Working Paper 8337, Harvard University OpenScholar.
  7. Nehring, Klaus, 2009. "Imprecise probabilistic beliefs as a context for decision-making under ambiguity," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1054-1091, May.
  8. Larry G. Epstein & Jiankang Zhang, 1999. "Subjective Probabilities on Subjectively Unambiguous Events," Carleton Economic Papers 99-18, Carleton University, Department of Economics.
  9. Marciano Siniscalchi, 2007. "Vector Expected Utility and Attitudes toward Variation," Discussion Papers 1455, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2011. "Definitions of ambiguous events and the smooth ambiguity model," Economic Theory, Springer, vol. 48(2), pages 399-424, October.
  11. Massimo Marinacci & Paolo Ghirardato, 2001. "Risk, ambiguity, and the separation of utility and beliefs," ICER Working Papers - Applied Mathematics Series 21-2001, ICER - International Centre for Economic Research.
  12. Paolo Ghirardato & Marciano Siniscalchi, 2010. "A more robust definition of multiple priors," Carlo Alberto Notebooks 144, Collegio Carlo Alberto.
  13. Massimo Marinacci, 2002. "Probabilistic Sophistication and Multiple Priors," Econometrica, Econometric Society, vol. 70(2), pages 755-764, March.
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  17. Machina,Mark & Schmeidler,David, 1991. "A more robust definition of subjective probability," Discussion Paper Serie A 365, University of Bonn, Germany.
  18. 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.
  19. Sujoy Mukerji & Peter Klibanoff, 2002. "A Smooth Model of Decision,Making Under Ambiguity," Economics Series Working Papers 113, University of Oxford, Department of Economics.
  20. Ghirardato, Paolo & Maccheroni, Fabio & Marinacci, Massimo, 2005. "Certainty Independence and the Separation of Utility and Beliefs," Journal of Economic Theory, Elsevier, vol. 120(1), pages 129-136, January.
  21. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  22. Klaus Nehring, . "Capacities And Probabilistic Beliefs: A Precarious Coexistence," Department of Economics 97-08, California Davis - Department of Economics.
  23. Klaus Nehring, 2006. "Is it Possible to Define Subjective Probabilities in Purely Behavioral Terms? A Comment on Epstein-Zhang (2001)," Economics Working Papers 0067, Institute for Advanced Study, School of Social Science.
  24. Ghirardato, Paolo & Marinacci, Massimo, 2002. "Ambiguity Made Precise: A Comparative Foundation," Journal of Economic Theory, Elsevier, vol. 102(2), pages 251-289, February.
  25. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May.
  26. Aurelien Baillon & Olivier L'Haridon & Laetitia Placido, 2011. "Ambiguity Models and the Machina Paradoxes," American Economic Review, American Economic Association, vol. 101(4), pages 1547-60, June.
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