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Ambiguity through confidence functions

Author

Listed:
  • Alain Chateauneuf

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • José Heleno Faro

    (CEDEPLAR - Centre for Development and Regional Planning - UFMG - Universidade Federal de Minas Gerais = Federal University of Minas Gerais [Belo Horizonte, Brazil])

Abstract

We characterize preference relations over bounded below Anscombe and Aumann's acts and give necessary and sufficient conditions that guarantee the existence of a utility function u on consequences, a confidence function [phi] on the set of all probabilities over states of nature, and a positive threshold level of confidence [alpha]0 such that our preference relation has a functional representation J, where given an act f The level set L[alpha]0[phi]:={p:[phi](p)>=[alpha]0} reflects the priors held by the decision maker and the value [phi](p) captures the relevance of prior p for his decision. The combination of [phi] and [alpha]0 may describe the decision maker's subjective assessment of available information. An important feature of our representation is the characterization of the maximal confidence function which allows us to obtain results on comparative ambiguity aversion and on special cases, namely the subjective expected utility, the Choquet expected utility with convex capacity, and the maxmin expected utility.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Alain Chateauneuf & José Heleno Faro, 2009. "Ambiguity through confidence functions," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00634651, HAL.
    • Handle: RePEc:hal:cesptp:hal-00634651
    DOI: 10.1016/j.jmateco.2009.05.001
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    References listed on IDEAS

    as
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