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Exactly What Happens After the Anscombe-Aumann Race? Representing Preferences in Vague Environments

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  • Marie-Louise Vierø

    ()
    (Department of Economics, Queen)

Abstract

This paper derives a representation of preferences for a choice theory with vague environments; vague in the sense that the agent does not know the precise lotteries over outcomes conditional on states. Instead, he knows only a possible set of these lotteries for each state. Thus, this paper's main departure from the standard subjective expected utility model is to relax an assumption about the environment, rather than weakening the axiomatic structure. My model is consistent with the behavior observed in the Ellsberg experiment. It can capture the same type of behavior as the multiple priors models, but can also result in behavior that is different from both the behavior implied by standard subjective expected utility models and the behavior implied by the multiple priors models.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1094.pdf
File Function: First version 2006
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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1094.

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Length: 43 pages
Date of creation: Oct 2006
Date of revision:
Publication status: Published in Economic Theory
Handle: RePEc:qed:wpaper:1094

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Keywords: Decision Theory; Vagueness; Utility; Optimism;

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  1. repec:hal:cesptp:halshs-00451982 is not listed on IDEAS
  2. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
  3. Epstein, Larry G. & Schneider, Martin, 2003. "Recursive multiple-priors," Journal of Economic Theory, Elsevier, vol. 113(1), pages 1-31, November.
  4. 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.
  5. Marie-Louise Vierø, 2006. "Contracting in Vague Environments," Working Papers 1106, Queen's University, Department of Economics.
  6. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  7. repec:hal:journl:halshs-00451982 is not listed on IDEAS
  8. repec:hal:journl:halshs-00130179 is not listed on IDEAS
  9. Larry G. Epstein & Massimo Marinacci & Seo Kyoungwon, 2006. "Coarse Contingencies," Carlo Alberto Notebooks 4, Collegio Carlo Alberto, revised 2007.
  10. Eddie Dekel, 1997. "A Unique Subjective State Space for Unforeseen Contingencies," Discussion Papers 1202, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  12. Truman F. Bewley, 1986. "Knightian Decision Theory: Part 1," Cowles Foundation Discussion Papers 807, Cowles Foundation for Research in Economics, Yale University.
  13. Ghirardato, Paolo & Maccheroni, Fabio & Marinacci, Massimo, 2004. "Differentiating ambiguity and ambiguity attitude," Journal of Economic Theory, Elsevier, vol. 118(2), pages 133-173, October.
  14. Kreps, David M, 1979. "A Representation Theorem for "Preference for Flexibility"," Econometrica, Econometric Society, vol. 47(3), pages 565-77, May.
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Cited by:
  1. Marie-Louise Vierø, 2006. "Contracting in Vague Environments," Working Papers 1106, Queen's University, Department of Economics.

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