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Updating Choquet Beliefs

  • Jurgen Eichberger

    (Alfred Weber Institut, Universitat HeidelbergAuthor-Name:)

  • Simon Grant

    (Rice University, Texas and Australian National University)

  • David Kelsey

    (Department of Economics, University of Exeter)

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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Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 0607.

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Date of creation: 2006
Date of revision:
Handle: RePEc:exe:wpaper:0607
Contact details of provider: Postal: Streatham Court, Rennes Drive, Exeter EX4 4PU
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  1. Costis Skiadas, 1997. "Conditioning and Aggregation of Preferences," Econometrica, Econometric Society, vol. 65(2), pages 347-368, March.
  2. Sujoy Mukerji & Jean-Marc Tallon, 2002. "Ambiguity Aversion and the Absence of Wage Indexation," Economics Series Working Papers 111, University of Oxford, Department of Economics.
  3. Larry G. Epstein & Martin Schneider, 2001. "Recursive Multiple-Priors," RCER Working Papers 485, University of Rochester - Center for Economic Research (RCER).
  4. Eichberger, Jurgen & Grant, Simon & Kelsey, David, 2005. "CEU preferences and dynamic consistency," Mathematical Social Sciences, Elsevier, vol. 49(2), pages 143-151, March.
  5. Wang, Tan, 2003. "Conditional preferences and updating," Journal of Economic Theory, Elsevier, vol. 108(2), pages 286-321, February.
  6. Marciano Siniscalchi, 2006. "Dynamic Choice Under Ambiguity," Discussion Papers 1430, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Ehud Lehrer, 2004. "Updating Non-Additive Probabilities -- A Geometric Approach," Game Theory and Information 0405010, EconWPA.
  8. Denneberg, Dieter, 2002. "Conditional expectation for monotone measures, the discrete case," Journal of Mathematical Economics, Elsevier, vol. 37(2), pages 105-121, April.
  9. Gilboa Itzhak & Schmeidler David, 1993. "Updating Ambiguous Beliefs," Journal of Economic Theory, Elsevier, vol. 59(1), pages 33-49, February.
  10. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May.
  11. André Lapied & Robert Kast, 2005. "Updating Choquet valuation and discounting information arrivals," Working Papers 05-09, LAMETA, Universtiy of Montpellier, revised Jan 2005.
  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. Eichberger, Jurgen & Kelsey, David, 2000. "Non-Additive Beliefs and Strategic Equilibria," Games and Economic Behavior, Elsevier, vol. 30(2), pages 183-215, February.
  14. Mukerji, Sujoy & Tallon, Jean-Marc, 2001. "Ambiguity Aversion and Incompleteness of Financial Markets," Review of Economic Studies, Wiley Blackwell, vol. 68(4), pages 883-904, October.
  15. 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.
  16. 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.
  17. Mukerji, Sujoy, 1998. "Ambiguity Aversion and Incompleteness of Contractual Form," American Economic Review, American Economic Association, vol. 88(5), pages 1207-31, December.
  18. 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.
  19. Cesaltina Pacheco Pires, 2002. "A Rule For Updating Ambiguous Beliefs," Theory and Decision, Springer, vol. 53(2), pages 137-152, September.
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