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Objective Imprecise Probabilistic Information, Second Order Beliefs and Ambiguity Aversion: an Axiomatization

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  • Raphaël Giraud

    ()
    (CRESE - Centre de recherche sur les stratégies économiques - Université de Franche-Comté, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Abstract

We axiomatize a model of decision under objective ambiguity or imprecise risk. The decision maker forms a subjective (non necessarily additive) belief aboutthe likelihood of probability distributions and computes the average expected utility of a given act with respect to this second order belief. We show that ambiguity aversion like the one revealed by the Ellsberg paradox requires that second order beliefs be nonadditive. Somespecial cases of the model are examined and different forms of ambiguity aversion are characterized.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00102346.

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Date of creation: 29 Sep 2006
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Handle: RePEc:hal:cesptp:halshs-00102346

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00102346
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Related research

Keywords: Imprecise probabilistic information; second order beliefs; non-additive probabilities; ambiguity aversion; Ellsberg paradox; Choquet integral;

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Cited by:
  1. Henry, Marc, 2007. "A representation of decision by analogy," Journal of Mathematical Economics, Elsevier, vol. 43(7-8), pages 771-794, September.
  2. Gajdos, T. & Hayashi, T. & Tallon, J.-M. & Vergnaud, J.-C., 2008. "Attitude toward imprecise information," Journal of Economic Theory, Elsevier, vol. 140(1), pages 27-65, May.
  3. Thibault Gajdos & Takashi Hayashi & Jean-Marc Tallon & Jean-Christophe Vergnaud, 2006. "Attitude toward imprecise information," Post-Print halshs-00130179, HAL.
  4. Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2011. "Ambiguity and Robust Statistics," Working Papers 382, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  5. Raphaël Giraud & Jean-Marc Tallon, 2009. "Are Beliefs a Matter of Taste ? A case for Objective Imprecise Information," Post-Print halshs-00442869, HAL.
  6. Leandro Nascimento & Gil Riella, 2013. "Second-order ambiguous beliefs," Economic Theory, Springer, vol. 52(3), pages 1005-1037, April.
  7. Thibault Gajdos & Takashi Hayashi & Jean-Marc Tallon & Jean-Christophe Vergnaud, 2008. "Attitude toward imprecise information," Post-Print halshs-00451982, HAL.
  8. Raphaël Giraud & Jean-Marc Tallon, 2011. "Are beliefs a matter of taste? A case for Objective Imprecise Information," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00502781, HAL.
  9. Riedel, Frank & Sass, Linda, 2013. "Ellsberg Games," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80012, Verein für Socialpolitik / German Economic Association.
  10. Giraud, Raphaël, 0. "Second order beliefs models of choice under imprecise risk: non-additive second order beliefs vs. nonlinear second order utility," Theoretical Economics, Econometric Society.

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