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Decision making with imprecise probabilistic information

  • Gajdos, Thibault
  • Tallon, Jean-Marc
  • Vergnaud, Jean-Christophe

We develop an axiomatic approach to decision under uncertainty that explicitly takes into account the information available to the decision maker. The information is described by a set of priors and a reference prior. We define a notion of imprecision for this informational setting and show that a decision maker who is averse to information imprecision maximizes the minimum expected utility computed with respect to a subset of the set of initially given priors. The extent to which this set is reduced can be seen as a measure of imprecision aversion. This approach thus allows a lot of flexibility in modelling the decision maker attitude towards imprecision. In contrast, applyingGilboa-Schmeidler [1989] maxmin criterion to the initial set of priors amounts to assuming extreme pessimism.

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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 40 (2004)
Issue (Month): 6 (September)
Pages: 647-681

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Handle: RePEc:eee:mateco:v:40:y:2004:i:6:p:647-681
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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