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Ambiguity as a Source of Temptation: Modeling Unstable Beliefs

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  • André Lapied

    ()
    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

  • Thomas Rongiconi

    ()
    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

Abstract

The "General-Self-Control-Preference" model introduced by Noor and Takeoka (2010) allows to take into account non linear costs of Self-Control. In this paper we extend this theory to situations in which a decision-maker faces ambiguity. We focus on the fact that lack of information is a potential source of temptation. Indeed lack of information doesn't allow the decision-maker to put a probability measure on uncertain events. Our basic hypothesis is that, in ambiguous situation, individuals are not confident enough about their beliefs and could therefore be tempted to use other beliefs to evaluate the alternatives in the second period. We study a two period model where ex ante dominated choice may tempt the decision-maker in the second period. Individuals have preferences over sets of alternatives that represent second period choices. We provide a Choice-Theoretic model where the ex-ante belief is a probability measure whereas ex post belief is a Choquet-capacity, in order to take into account individual attitudes towards ambiguity in the second period.

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Bibliographic Info

Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1316.

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Length: 31 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:aim:wpaimx:1316

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Web page: http://www.amse-aixmarseille.fr/en
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Keywords: Temptation; Self-control; Ambiguity; Choquet-Expected-Utility; Comonotonic-Temptation-Independence.;

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  2. Eddie Dekel, 1997. "A Unique Subjective State Space for Unforeseen Contingencies," Discussion Papers 1202, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Epstein, Larry G. & Seo, Kyoungwon, 2009. "Subjective states: A more robust model," Games and Economic Behavior, Elsevier, vol. 67(2), pages 408-427, November.
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  24. Kalyan Chatterjee & R. Vijay Krishna, 2009. "A "Dual Self" Representation for Stochastic Temptation," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 148-67, August.
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