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Crisp Fair Gambles

  • Éric André

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

Axiomatic models of decision under ambiguity with a non-unique prior allow for the existence of Crisp Fair Gambles: acts whose expected utility is nul whichever of the priors is used. But, in these models, the DM has to be indifferent to the addition of such acts. Their existence is then at odds with a preference taking into account the variance of the prospects. In this paper we study some geometrical and topological properties of the set of priors that would rule out the existence of Crisp Fair Gambles, properties which have consequences on what can be an unambiguous financial asset.

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Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1410.

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Length: 28 pages
Date of creation: 25 Mar 2014
Date of revision: 15 Mar 2014
Handle: RePEc:aim:wpaimx:1410
Contact details of provider: Web page: http://www.amse-aixmarseille.fr/en

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  1. Strzalecki, Tomasz, 2011. "Axiomatic Foundations of Multiplier Preferences," Scholarly Articles 14397610, Harvard University Department of Economics.
  2. repec:cup:cbooks:9780521741231 is not listed on IDEAS
  3. Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2008. "Uncertainty Averse Preferences," Carlo Alberto Notebooks 77, Collegio Carlo Alberto.
  4. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  5. Černý, Aleš & Maccheroni, Fabio & Marinacci, Massimo & Rustichini, Aldo, 2012. "On the computation of optimal monotone mean–variance portfolios via truncated quadratic utility," Journal of Mathematical Economics, Elsevier, vol. 48(6), pages 386-395.
  6. Marciano Siniscalchi, 2007. "Vector Expected Utility and Attitudes toward Variation," Discussion Papers 1455, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Nehring, Klaus, 1999. "Capacities and probabilistic beliefs: a precarious coexistence," Mathematical Social Sciences, Elsevier, vol. 38(2), pages 197-213, September.
  8. 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.
  9. Simone Cerreia-Vioglio, 2011. "Objective Rationality and Uncertainty Averse Preferences," Working Papers 413, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  10. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
  11. Itzhak Gilboa & Fabio Maccheroni & Massimo Marinacci & David Schmeidler, 2010. "Objective and Subjective Rationality in a Multiple Prior Model," Econometrica, Econometric Society, vol. 78(2), pages 755-770, 03.
  12. 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.
  13. Simone Cerreia-Vioglio & Paolo Ghirardato & Fabio Maccheroni & Massimo Marinacci & Marciano Siniscalchi, 2011. "Rational preferences under ambiguity," Economic Theory, Springer, vol. 48(2), pages 341-375, October.
  14. repec:cup:cbooks:9780521517324 is not listed on IDEAS
  15. Truman F. Bewley, 1986. "Knightian Decision Theory: Part 1," Cowles Foundation Discussion Papers 807, Cowles Foundation for Research in Economics, Yale University.
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