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Ambiguity as a Source of Temptation: Modeling Unstable Beliefs

  • André Lapied

    (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM))

  • Thomas Rongiconi

    ()

    (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM))

The "General-Self-Control-Preference" model introduced by Noor and Takeoka (2010) allows to take into account non linear costs of Self-Control. In this paper we extend this theory to situations in which a decision-maker faces ambiguity. We focus on the fact that lack of information is a potential source of temptation. Indeed lack of information doesn't allow the decision-maker to put a probability measure on uncertain events. Our basic hypothesis is that, in ambiguous situation, individuals are not confident enough about their beliefs and could therefore be tempted to use other beliefs to evaluate the alternatives in the second period. We study a two period model where ex ante dominated choice may tempt the decision-maker in the second period. Individuals have preferences over sets of alternatives that represent second period choices. We provide a Choice-Theoretic model where the ex ante belief is a probability measure whereas ex post belief is a Choquet-capacity, in order to take into account individual attitudes towards ambiguity in the second period.

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Paper provided by HAL in its series Working Papers with number halshs-00797631.

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Date of creation: Mar 2013
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Handle: RePEc:hal:wpaper:halshs-00797631
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  1. Faruk Gul & Wolfgang Pesendorfer, 2007. "Harmful Addiction," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 147-172.
  2. Jawwad Noor, 2005. "Temptation, Welfare and Revealed Preference," Microeconomics 0509009, EconWPA.
  3. Jawwad Noor & Norio Takeoka, 2011. "Menu-Dependent Self-Control," Boston University - Department of Economics - Working Papers Series WP2011-041, Boston University - Department of Economics.
  4. Larry Epstein, 2002. "An Axiomatic Model of Non-Bayesian Updating," RCER Working Papers 498, University of Rochester - Center for Economic Research (RCER), revised Jan 2005.
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  8. Eddie Dekel & Barton L. Lipman & Aldo Rustichini, 2006. "Temptation–Driven Preferences," Boston University - Department of Economics - Working Papers Series WP2006-024, Boston University - Department of Economics.
  9. Klaus Nehring, 2006. "Self-Control through Second-Order Preferences," Levine's Bibliography 321307000000000391, UCLA Department of Economics.
  10. Jawwad Noor, 2011. "Temptation and Revealed Preference," Econometrica, Econometric Society, vol. 79(2), pages 601-644, 03.
  11. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
  12. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  13. Larry G. Epstein & Jawwad Noor & Alvaro Sandroni, 2005. "Non-Bayesian Updating: A Theoretical Framework," Boston University - Department of Economics - Working Papers Series WP2005-025, Boston University - Department of Economics.
  14. Barbos, Andrei, 2010. "Context effects: A representation of choices from categories," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1224-1243, May.
  15. Jawwad Noor, 2005. "Commitment and Self-Control," Microeconomics 0509008, EconWPA.
  16. Eddie Dekel, 1997. "A Unique Subjective State Space for Unforeseen Contingencies," Discussion Papers 1202, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Epstein, Larry G. & Seo, Kyoungwon, 2009. "Subjective states: A more robust model," Games and Economic Behavior, Elsevier, vol. 67(2), pages 408-427, November.
  18. Kopylov, Igor, 2009. "Finite additive utility representations for preferences over menus," Journal of Economic Theory, Elsevier, vol. 144(1), pages 354-374, January.
  19. Alain Chateauneuf & Robert Kast & André Lapied, 2001. "Conditioning Capacities and Choquet Integrals: The Role of Comonotony," Theory and Decision, Springer, vol. 51(2), pages 367-386, December.
  20. Chatterjee, Kalyan & Krishna, R. Vijay, 2008. "A geometric approach to continuous expected utility," Economics Letters, Elsevier, vol. 98(1), pages 89-94, January.
  21. Todd Sarver, 2008. "Anticipating Regret: Why Fewer Options May Be Better," Econometrica, Econometric Society, vol. 76(2), pages 263-305, 03.
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  24. Kreps, David M, 1979. "A Representation Theorem for "Preference for Flexibility"," Econometrica, Econometric Society, vol. 47(3), pages 565-77, May.
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  26. Kopylov Igor, 2009. "Temptations in General Settings," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, September.
  27. Kalyan Chatterjee & R. Vijay Krishna, 2009. "A "Dual Self" Representation for Stochastic Temptation," American Economic Journal: Microeconomics, American Economic Association, vol. 1(2), pages 148-67, August.
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