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What were you thinking? Decision theory as coherence test

Author

Listed:
  • Gilboa, Itzhak

    (School of Economics, Tel Aviv University and Department of Economics and Decision Sciences, HEC, Paris)

  • Samuelson, Larry

    (Department of Economics, Yale University)

Abstract

Decision theory can be used to test the logic of decision making---one may ask whether a given set of decisions can be justified by a decision-theoretic model. Indeed, in principal-agent settings, such justifications may be required---a manager of an investment fund may be asked what beliefs she used when valuing assets and a government may be asked whether a portfolio of rules and regulations is coherent. In this paper we ask which collections of uncertain-act evaluations can be simultaneously justified under the maxmin expected utility criterion by a single set of probabilities. We draw connections to the the Fundamental Theorem of Finance (for the special case of a Bayesian agent) and revealed-preference results.

Suggested Citation

  • Gilboa, Itzhak & Samuelson, Larry, 2022. "What were you thinking? Decision theory as coherence test," Theoretical Economics, Econometric Society, vol. 17(2), May.
    • Handle: RePEc:the:publsh:4707
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    Citations

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    Cited by:

    1. Gianluca Cassese, 2023. "Subjective Expected Utility and Psychological Gambles," Papers 2307.10328, arXiv.org, revised Oct 2023.
    2. Giulio Principi & Peter P. Wakker & Ruodu Wang, 2023. "Antimonotonicity for Preference Axioms: The Natural Counterpart to Comonotonicity," Papers 2307.08542, arXiv.org.

    More about this item

    Keywords

    Decision theory; revealed preference; coherence; maxmin expected utility;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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