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Is it Possible to Define Subjective Probabilities in Purely Behavioral Terms? A Comment on Epstein-Zhang (2001)

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Klaus Nehring () (Department of Economics, University of California Davis)
Abstract

It is shown that well-behaved preference orderings may exhibit the Ellsberg paradox on the set of unambiguous events as defined by Epstein and Zhang (2001). Moreover, since such counterexamples can be constructed even when the set of unambiguous events is rich, EZ’s main representation result does not clarify satisfactorily when the proposed definition delivers probabilistic sophistication on unambiguous events. We conclude by conjecturing that these problems indicate the existence of inherent limitations of a strictly behavioral approach to identifying probabilistic beliefs in the presence of ambiguity, rather than deficiencies in EZ’s implementation of that approach.

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Paper provided by Institute for Advanced Study, School of Social Science in its series Economics Working Papers with number 0067.

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Length: 15 pages
Date of creation: Apr 2006
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Handle: RePEc:ads:wpaper:0067

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  1. Klaus Nehring, 2006. "Decision-Making in the Context of Imprecise Probabilistic Beliefs," Economics Working Papers 0034, Institute for Advanced Study, School of Social Science. [Downloadable!]
  2. Epstein, Larry G & Zhang, Jiankang, 2001. "Subjective Probabilities on Subjectively Unambiguous Events," Econometrica, Econometric Society, vol. 69(2), pages 265-306, March.
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  3. Kopylov, Igor, 2007. "Subjective probabilities on "small" domains," Journal of Economic Theory, Elsevier, vol. 133(1), pages 236-265, March. [Downloadable!] (restricted)
  4. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2002. "A smooth model of decision making under ambiguity," ICER Working Papers - Applied Mathematics Series 11-2003, ICER - International Centre for Economic Research, revised Apr 2003. [Downloadable!]
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  5. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April. [Downloadable!] (restricted)
  6. Amarante, Massimiliano & Filiz, Emel, 2007. "Ambiguous events and maxmin expected utility," Journal of Economic Theory, Elsevier, vol. 134(1), pages 1-33, May. [Downloadable!] (restricted)
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  7. Epstein, Larry G. & Schneider, Martin, 2003. "Recursive multiple-priors," Journal of Economic Theory, Elsevier, vol. 113(1), pages 1-31, November. [Downloadable!] (restricted)
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  8. Ghirardato, Paolo & Maccheroni, Fabio & Marinacci, Massimo, 2004. "Differentiating ambiguity and ambiguity attitude," Journal of Economic Theory, Elsevier, vol. 118(2), pages 133-173, October. [Downloadable!] (restricted)
  9. Ghirardato, Paolo & Marinacci, Massimo, 2002. "Ambiguity Made Precise: A Comparative Foundation," Journal of Economic Theory, Elsevier, vol. 102(2), pages 251-289, February. [Downloadable!] (restricted)
  10. Nehring, Klaus, 1999. "Capacities and probabilistic beliefs: a precarious coexistence," Mathematical Social Sciences, Elsevier, vol. 38(2), pages 197-213, September. [Downloadable!] (restricted)
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