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A reformulation of the maxmin expected utility model with application to agency theory

  • Karni, Edi

Invoking the parameterized distribution formulation of agency theory, the paper develops axiomatic foundations of the principal's and agent's choice behaviors that are representable by the maximization of the minimum expected utility over action-dependent sets of priors. In the context of this model, the paper also discusses some implications of ambiguity aversion for the design of optimal incentive schemes.

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File URL: http://www.sciencedirect.com/science/article/B6VBY-4T2S8W5-3/2/59c4ea06424994266a871cf137a33387
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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 45 (2009)
Issue (Month): 1-2 (January)
Pages: 97-112

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Handle: RePEc:eee:mateco:v:45:y:2009:i:1-2:p:97-112
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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  1. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
  2. Sujoy Mukerji, 2002. "Ambiguity Aversion and Cost-Plus Procurement Contracts," Economics Series Working Papers 112, University of Oxford, Department of Economics.
  3. DREZE, Jacques H. & RUSTICHINI, Aldo, 1995. "Moral Hazard and Conditional Preferences," CORE Discussion Papers 1995010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. F J Anscombe & R J Aumann, 2000. "A Definition of Subjective Probability," Levine's Working Paper Archive 7591, David K. Levine.
  5. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2004. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Carlo Alberto Notebooks 12, Collegio Carlo Alberto, revised 2006.
  6. Ghirardato, Paolo & Maccheroni, Fabio & Marinacci, Massimo, 2004. "Differentiating ambiguity and ambiguity attitude," Journal of Economic Theory, Elsevier, vol. 118(2), pages 133-173, October.
  7. Karni, Edi, 2006. "Subjective expected utility theory without states of the world," Journal of Mathematical Economics, Elsevier, vol. 42(3), pages 325-342, June.
  8. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  9. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May.
  10. repec:dgr:kubcen:1998128 is not listed on IDEAS
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