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Recursive Multiple-Priors

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Author Info

  • Larry G. Epstein

    ()
    (University of Rochester)

  • Martin Schneider

    ()
    (UCLA)

Abstract

This paper axiomatizes an intertemporal version of multiple-ptiors utility. A central axiom is dynamic consistency, which leads to a recursive structure for utility, to 'rectangular' sets of priors and to prior-by-prior Bayesian updating as the updating rule for such sets of priors. It is argued that dynamic consitency is intuitive in a wide range of situations and that the model is consistent with a rich set of possibilities for dynamic behavior under ambiguity.

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File URL: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_485.pdf
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Bibliographic Info

Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 485.

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Length: 41 pages
Date of creation: Aug 2001
Date of revision:
Handle: RePEc:roc:rocher:485

Contact details of provider:
Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

Related research

Keywords: ambiguity; updating; recursive utility; dynamic consistency; multiple-priors; Bayesian updating; robust decision-making; model uncertainty;

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