Crisp Fair Gambles
AbstractAxiomatic models of decision under ambiguity with a non-unique prior allow for the existence of Crisp Fair Gambles: acts whose expected utility is nul whichever of the priors is used. But, in these models, the DM has to be indifferent to the addition of such acts. Their existence is then at odds with a preference taking into account the variance of the prospects. In this paper we study some geometrical and topological properties of the set of priors that would rule out the existence of Crisp Fair Gambles, properties which have consequences on what can be an unambiguous financial asset.
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Bibliographic InfoPaper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1410.
Length: 28 pages
Date of creation: 25 Mar 2014
Date of revision: 15 Mar 2014
monotone mean-variance preferences; Ambiguity; set of priors; crisp acts; unambiguous asset;
Other versions of this item:JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-05-09 (All new papers)
- NEP-MIC-2014-05-09 (Microeconomics)
- NEP-UPT-2014-05-09 (Utility Models & Prospect Theory)
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