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Second-Order Beliefs and Second-Order Expected Utility

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  • Victor Filipe Martins da Rocha

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, EESP - Sao Paulo School of Economics - FGV - Fundacao Getulio Vargas [Rio de Janeiro])

  • Rafael Mouallem

    (EESP - Sao Paulo School of Economics - FGV - Fundacao Getulio Vargas [Rio de Janeiro])

Abstract

We present an axiomatization of the Second-Order Expected Utility model in the environment of Anscombe and Aumann (1963) where the domain of the preference relation is the set of lotteries over all acts whose prize are lotteries. We replace the axiom of reversal of order in compound lotteries (Assumption 1 in Anscombe and Aumann (1963)) by an extension of monotonicity in the prizes (Assumption 2 in Anscombe and Aumann (1963)) that is a strengthening of the Dominance axiom introduced by Seo (2009). This extends the contributions of Grant et al. (2009) by allowing for a general representation result without restricting the decision maker's attitude towards subjective uncertainty.

Suggested Citation

  • Victor Filipe Martins da Rocha & Rafael Mouallem, 2020. "Second-Order Beliefs and Second-Order Expected Utility," Working Papers hal-02922263, HAL.
    • Handle: RePEc:hal:wpaper:hal-02922263
    Note: View the original document on HAL open archive server: https://hal.science/hal-02922263
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    References listed on IDEAS

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