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Observability and “Second-Order Acts"

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  • Nabil I. Al-Najjar
  • Luciano De Castro

Abstract

This note questions the behavioral content of second-order acts and their use in decision theoretic models. We show that there can be no verification mechanism to determine what the decision maker receives under a second-order act. This impossibility applies even in idealized repeated experiments where infinite data can be observed. JEL Classification Numbers:

Suggested Citation

  • Nabil I. Al-Najjar & Luciano De Castro, 2010. "Observability and “Second-Order Acts"," Discussion Papers 1531, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1531
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    References listed on IDEAS

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    8. Simon Grant & Ben Polak & Tomasz Strzalecki, "undated". "Second-Order Expected Utility," Working Paper 8340, Harvard University OpenScholar.
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    Cited by:

    1. Nabil I. Al-Najjar & Luciano De Castro, 2010. "Prediction Markets to Forecast Electricity Demand," Discussion Papers 1529, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Mark Schneider & Manuel Nunez, 2016. "Mean-Dispersion Preferences with a Specific Dispersion Function," Working Papers 16-10, Chapman University, Economic Science Institute.
    3. Nunez, Manuel & Schneider, Mark, 2019. "Mean-dispersion preferences with a specific dispersion function," Journal of Mathematical Economics, Elsevier, vol. 84(C), pages 195-206.

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