Subjective Probabilities on Subjectively Unambiguous Events
AbstractThe paper suggests a behavioural definition of (subjective) ambiguity in an abstract setting where objects of choice are Savage-style acts. Then axioms are described that deliver probabilistic sophistication of preference on the set of unambiguous acts. In particular, both the domain and the values of the decision-maker's probability measure are dervied from perference, delivering thereby a 'fully subjective' theory of probability. It is argued that the noted result also provides a decision-theoretic foundation for the Knightian distinction between risk and ambiguity and that it provides a unifed framework for analysing attitudes towards risk and towards ambiguity.
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Bibliographic InfoPaper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 99-18.
Length: 50 pages
Date of creation: Nov 1999
Date of revision:
Publication status: Published: – revised version in Econometrica, Vol. 69, No. 2 (March 2001), pp. 265–306
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Other versions of this item:
- Epstein, Larry G & Zhang, Jiankang, 2001. "Subjective Probabilities on Subjectively Unambiguous Events," Econometrica, Econometric Society, vol. 69(2), pages 265-306, March.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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