Advanced Search
MyIDEAS: Login to save this paper or follow this series

Why Does It Matter That Beliefs and Valuations Be Correctly Represented?

Contents:

Author Info

  • Grant, Simon

    (Rice U)

  • Karni, Edi

    (Johns Hopkins U)

Abstract

This paper contains an analysis of a simple principal-agent problem illustrating possible problems that arise when the principal ascribes to the agent subjective probabilities and utilities that are implied by the subjective expected utility model but do not represent the agent's beliefs and valuations. In particular, it is possible that an incentive contract designed by the principal induces the agent to choose an action that is not in the principal's best interest.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ruf.rice.edu/~econ/papers/2003papers/02Grant.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Rice University, Department of Economics in its series Working Papers with number 2003-02.

as in new window
Length:
Date of creation: Jul 2003
Date of revision:
Handle: RePEc:ecl:riceco:2003-02

Contact details of provider:
Postal: MS-22, 6100 South Main, Houston, TX 77005-1892
Phone: (713) 527-4875
Fax: (713) 285-5278
Email:
Web page: http://www.ruf.rice.edu/~econ/papers/index.html
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
  2. Edi Karni, 2005. "Foundations of Bayesian Theory," Economics Working Paper Archive 524, The Johns Hopkins University,Department of Economics.
  3. Karni, Edi, 1996. "Probabilities and Beliefs," Journal of Risk and Uncertainty, Springer, vol. 13(3), pages 249-62, November.
  4. Bengt Holmstrom, 1997. "Moral Hazard and Observability," Levine's Working Paper Archive 1205, David K. Levine.
  5. Colin F. Camerer, 1997. "Progress in Behavioral Game Theory," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 167-188, Fall.
  6. Karni, Edi & Schmeidler, David, 1993. "On the Uniqueness of Subjective Probabilities," Economic Theory, Springer, vol. 3(2), pages 267-77, April.
  7. E. Karni & Ph. Mongin, 1997. "On the determination of subjective probability by choices," THEMA Working Papers 97-37, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  8. Steven Shavell, 1979. "Risk Sharing and Incentives in the Principal and Agent Relationship," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 55-73, Spring.
  9. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
  10. Grant, Simon & Karni, Edi, 2004. "A theory of quantifiable beliefs," Journal of Mathematical Economics, Elsevier, vol. 40(5), pages 515-546, August.
  11. George Loewenstein, 2000. "Emotions in Economic Theory and Economic Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 426-432, May.
  12. Karni, Edi & Postlewaite, Andrew, 2005. "David Schmeidler," Games and Economic Behavior, Elsevier, vol. 50(1), pages 1-2, January.
  13. Luce, R Duncan & Krantz, David H, 1971. "Conditional Expected Utility," Econometrica, Econometric Society, vol. 39(2), pages 253-71, March.
  14. Paolo Ghirardato, 2002. "Revisiting Savage in a conditional world," Economic Theory, Springer, vol. 20(1), pages 83-92.
  15. Paul M. Romer, 2000. "Thinking and Feeling," American Economic Review, American Economic Association, vol. 90(2), pages 439-443, May.
  16. Karni, Edi, 2003. " On the Representation of Beliefs by Probabilities," Journal of Risk and Uncertainty, Springer, vol. 26(1), pages 17-38, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. David Dillenberger & Andrew Postlewaite & Kareen Rozen, 2011. "Optimism and Pessimism with Expected Utility," Cowles Foundation Discussion Papers 1829, Cowles Foundation for Research in Economics, Yale University.
  2. David Dillenberger & Andrew Postlewaite & Kareen Rozen, 2011. "Optimism and Pessimism with Expected Utility, Third Version," PIER Working Paper Archive 13-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 26 Dec 2012.
  3. Marie-Louise Vierø, 2006. "Contracting in Vague Environments," Working Papers 1106, Queen's University, Department of Economics.
  4. Sadowski, Philipp, 2008. "Conditional Preference for Flexibility: Eliciting Beliefs from Behavior," MPRA Paper 8614, University Library of Munich, Germany.
  5. Sadowski, Philipp, 2013. "Contingent preference for flexibility: eliciting beliefs from behavior," Theoretical Economics, Econometric Society, vol. 8(2), May.
  6. David Dillenberger & Andrew Postlewaite & Kareen Rozen, 2011. "Optimism and Pessimism with Expected Utility, Second Version," PIER Working Paper Archive 12-031, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 10 Aug 2012.
  7. Philipp Sadowski, 2011. "Contingent Preference for Flexibility: Eliciting Beliefs from Behavior," Levine's Working Paper Archive 661465000000001189, David K. Levine.
  8. David Dillenberger & Andrew Postlewaite & Kareen Rozen, 2011. "Optimism and Pessimism with Expected Utility, Fourth Version," PIER Working Paper Archive 13-068, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Nov 2013.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecl:riceco:2003-02. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.