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Crisp Fair Gambles

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  • Eric André

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

Axiomatic models of decision under ambiguity with a non-unique prior allow for the existence of Crisp Fair Gambles: acts whose expected utility is nul whichever of the priors is used. But, in these models, the DM has to be indifferent to the addition of such acts. Their existence is then at odds with a preference taking into account the variance of the prospects. In this paper we study some geometrical and topological properties of the set of priors that would rule out the existence of Crisp Fair Gambles, properties which have consequences on what can be an unambiguous financial asset.

Suggested Citation

  • Eric André, 2014. "Crisp Fair Gambles," Working Papers halshs-00984352, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00984352
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00984352
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    References listed on IDEAS

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    More about this item

    Keywords

    monotone mean-variance preferences; ambiguity; set of priors; crisp acts; unambiguous asset;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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