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Objective and Subjective Rationality in a Multiple Prior Model

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Author Info
Itzhak Gilboa
Fabio Maccheroni
Massimo Marinacci
David Schmeidler

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Abstract

A decision maker is characterized by two binary relations. The first reflects decisions that are rational in an “objective” sense: the decision maker can convince others that she is right in making them. The second relation models decisions that are rational in a “subjective” sense: the decision maker cannot be convinced that she is wrong in making them. We impose axioms on these relations that allow a joint representation by a single set of prior probabilities. It is “objectively rational” to choose f in the presence of g if and only if the expected utility of f is at least as high as that of g given each and every prior in the set. It is “subjectively rational” to choose f rather than g if and only if the minimal expected utility of f (relative to all priors in the set) is at least as high as that of g.

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Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 73.

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Length: 45 pages
Date of creation: 2008
Date of revision: 2008
Handle: RePEc:cca:wpaper:73

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Keywords: Rationality; Multiple Priors.;

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Find related papers by JEL classification:
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2008. "Complete Monotone Quasiconcave Duality," Carlo Alberto Notebooks 80, Collegio Carlo Alberto. [Downloadable!]
  2. Hill, Brian, 2009. "Confidence and ambiguity," Les Cahiers de Recherche 914, HEC Paris. [Downloadable!]
  3. Esteban Jaimovich, 2008. "Adverse Selection and Entrepreneurship in a Model of Development," Carlo Alberto Notebooks 78, Collegio Carlo Alberto. [Downloadable!]
  4. Heller, Yuval, 2009. "Justifiable choice," MPRA Paper 15645, University Library of Munich, Germany. [Downloadable!]
  5. Ales Cerný & Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2008. "On the Computation of Optimal Monotone Mean-Variance Portfolios via Truncated Quadratic Utility," Carlo Alberto Notebooks 79, Collegio Carlo Alberto. [Downloadable!]
  6. Itzhak Gilboa, 2009. "Questions in Decision Theory," Levine's Working Paper Archive 814577000000000335, David K. Levine. [Downloadable!]
  7. Russell Gerrard & Bjarne Højgaard & Elena Vigna, 2008. "Choosing the Optimal Annuitization Time Post Retirement," Carlo Alberto Notebooks 76, Collegio Carlo Alberto. [Downloadable!]
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