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Purely subjective variational preferences

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  • Craig S. Webb

    (The University of Manchester)

Abstract

Variational preferences (Maccheroni et al. in Econometrica 74:1447–1498, 2006) are an important class of ambiguity averse preferences, compatible with Ellsberg-type phenomena. In this paper, a new foundation for variational preferences is derived in a framework of two stages of purely subjective uncertainty. A similar foundation is obtained for purely subjective maxmin expected utility (Gilboa and Schmeidler in J Math Econ 18:141–153, 1989). By establishing their axiomatic foundations without the use of extraneous probabilities, the conceptual appeal and applicability of these ambiguity models is enhanced.

Suggested Citation

  • Craig S. Webb, 2017. "Purely subjective variational preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(1), pages 121-137, June.
    • Handle: RePEc:spr:joecth:v:64:y:2017:i:1:d:10.1007_s00199-016-1003-2
    DOI: 10.1007/s00199-016-1003-2
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    2. Abdellaoui, Mohammed & Wakker, Peter P., 2020. "Savage for dummies and experts," Journal of Economic Theory, Elsevier, vol. 186(C).

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    More about this item

    Keywords

    Variational preferences; Ambiguity aversion; Subjective uncertainty;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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