Unbounded probabilistic sophistication
I extend Machina and Schmeidler's (1992) model of probabilistic sophistication to unbounded uncertain prospects (acts) and derive risk preferences over the induced probability distributions (lotteries) with unbounded support. For example, risk preferences can be derived over normal, exponential, and Poisson families of probability distributions. My extension uses a version of Arrow's (1970) Monotone Continuity, which implies countable additivity for subjective beliefs and a novel property of tail-continuity for the revealed risk preferences. On the other hand, I do not assume P6 (Small Event Continuity) that is used both by Savage (1954) and Machina-Schmeidler.
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Volume (Year): 60 (2010)
Issue (Month): 2 (September)
Pages: 113-118
| Handle: | RePEc:eee:matsoc:v:60:y:2010:i:2:p:113-118 |
| Contact details of provider: | Web page: http://www.elsevier.com/locate/inca/505565
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References listed on IDEAS
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- Alain Chateauneuf & Fabio Maccheroni & Massimo Marinacci & Jean-Marc Tallon, 2005.
"Monotone continuous multiple priors,"
Economic Theory,
Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(4), pages 973-982, November.
- Massimo Marinacci & Fabio Maccheroni & Alain Chateauneuf & Jean-Marc Tallon, 2003. "Monotone Continuous Multiple Priors," ICER Working Papers - Applied Mathematics Series 30-2003, ICER - International Centre for Economic Research.
- Alain Chateauneuf & Fabio Macheronni & Massimo Marinacci & Jean-Marc Tallon, 2005. "Monotone continuous multiple priors," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00177057, HAL.
- Machina, Mark J & Schmeidler, David, 1992. "A More Robust Definition of Subjective Probability," Econometrica, Econometric Society, vol. 60(4), pages 745-780, July.
- Mark J. Machina & David Schmeidler, 1990. "A More Robust Definition of Subjective Probability," Discussion Paper Serie A 306, University of Bonn, Germany.
- Machina,Mark & Schmeidler,David, 1991. "A more robust definition of subjective probability," Discussion Paper Serie A 365, University of Bonn, Germany.
- Kopylov, Igor, 2010. "Simple axioms for countably additive subjective probability," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 867-876, September.
- Sarin, Rakesh & Wakker, Peter P., 2000. "Cumulative dominance and probabilistic sophistication," Mathematical Social Sciences, Elsevier, vol. 40(2), pages 191-196, September.
- Chew Soo Hong & Jacob S. Sagi, 2006. "Event Exchangeability: Probabilistic Sophistication Without Continuity or Monotonicity," Econometrica, Econometric Society, vol. 74(3), pages 771-786, 05.
- Grant, Simon, 1995. "Subjective Probability without Monotonicity: Or How Machina's Mom May Also Be Probabilistically Sophisticated," Econometrica, Econometric Society, vol. 63(1), pages 159-189, January.
- Massimo Marinacci, 2002. "Probabilistic Sophistication and Multiple Priors," Econometrica, Econometric Society, vol. 70(2), pages 755-764, March.
- Massimo Marinacci, 2001. "Probabilistic sophistication and multiple priors," ICER Working Papers - Applied Mathematics Series 08-2001, ICER - International Centre for Economic Research.
- Peter Wakker, 1993. "Savage's Axioms Usually Imply Violation of Strict Stochastic Dominance," Review of Economic Studies, Oxford University Press, vol. 60(2), pages 487-493. Full references (including those not matched with items on IDEAS)
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