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Updating Choquet beliefs

  • Eichberger, Jurgen
  • Grant, Simon
  • Kelsey, David

We apply Pires’s coherence property between unconditional and conditional preferences that admit a CEU representation. In conjunction with consequentialism (only those outcomes on states which are still possible can matter for conditional preference) this implies that the conditional preference may be obtained from the unconditional preference by taking the Full Bayesian Update of the capacity. Attitudes towards sequential versus simultaneous resolution of uncertainty for a simple bet are analyzed. We show that for a class of recursive CEU preferences which exhibit both optimism and pessimism, a 'good-news' signal is preferred to no signal which is preferred to a 'bad-news' signal.

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

Volume (Year): 43 (2007)
Issue (Month): 7-8 (September)
Pages: 888-899

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Handle: RePEc:eee:mateco:v:43:y:2007:i:7-8:p:888-899
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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  1. Eichberger, Jurgen & Grant, Simon & Kelsey, David, 2005. "CEU preferences and dynamic consistency," Mathematical Social Sciences, Elsevier, vol. 49(2), pages 143-151, March.
  2. Sujoy Mukerji & Jean-Marc Tallon, 2000. "Ambiguity Aversion and Incompleteness of Financial Markets," Economics Series Working Papers 46, University of Oxford, Department of Economics.
  3. André Lapied & Robert Kast, 2009. "Updating Choquet valuation and discounting information arrivals," Working Papers halshs-00410532, HAL.
  4. Dow, James & Werlang, Sergio Ribeiro da Costa, 1992. "Uncertainty Aversion, Risk Aversion, and the Optimal Choice of Portfolio," Econometrica, Econometric Society, vol. 60(1), pages 197-204, January.
  5. Wang, Tan, 2003. "Conditional preferences and updating," Journal of Economic Theory, Elsevier, vol. 108(2), pages 286-321, February.
  6. Costis Skiadas, 1997. "Conditioning and Aggregation of Preferences," Econometrica, Econometric Society, vol. 65(2), pages 347-368, March.
  7. Denneberg, Dieter, 2002. "Conditional expectation for monotone measures, the discrete case," Journal of Mathematical Economics, Elsevier, vol. 37(2), pages 105-121, April.
  8. Itzhak Gilboa & David Schmeidler, 1991. "Updating Ambiguous Beliefs," Discussion Papers 924, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Jean-Marc Tallon & Sujoy Mukerji, 2004. "Ambiguity aversion and the absence of wage indexation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00174562, HAL.
  10. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
  11. Ehud Lehrer, 2004. "Updating Non-Additive Probabilities -- A Geometric Approach," Game Theory and Information 0405010, EconWPA.
  12. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  13. Cesaltina Pacheco Pires, 2002. "A Rule For Updating Ambiguous Beliefs," Theory and Decision, Springer, vol. 53(2), pages 137-152, September.
  14. Mukerji, S., 1997. "Ambiguity aversion and incompleteness of contractual form," Discussion Paper Series In Economics And Econometrics 9715, Economics Division, School of Social Sciences, University of Southampton.
  15. Marciano Siniscalchi, 2006. "Dynamic Choice Under Ambiguity," Discussion Papers 1430, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Larry G. Epstein & Martin Schneider, 2001. "Recursive Multiple-Priors," RCER Working Papers 485, University of Rochester - Center for Economic Research (RCER).
  17. Eichberger, Jurgen & Kelsey, David, 2002. "Strategic Complements, Substitutes, and Ambiguity: The Implications for Public Goods," Journal of Economic Theory, Elsevier, vol. 106(2), pages 436-466, October.
  18. Eichberger, Jurgen & Kelsey, David, 2000. "Non-Additive Beliefs and Strategic Equilibria," Games and Economic Behavior, Elsevier, vol. 30(2), pages 183-215, February.
  19. Wakker, Peter P, 2001. "Testing and Characterizing Properties of Nonadditive Measures through Violations of the Sure-Thing Principle," Econometrica, Econometric Society, vol. 69(4), pages 1039-59, July.
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