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Probabilistic Sophistication and Variational Preferences

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  • Tomasz Strzalecki

Abstract

This paper shows that in the class of variational preferences the notion of probabilistic sophistication is equivalent to expected utility as long as there exists at least one event such that the independence axiom holds for bets on that event. This extends a result of Marinacci (2002) and provides a novel interpretation of his result.

Suggested Citation

  • Tomasz Strzalecki, "undated". "Probabilistic Sophistication and Variational Preferences," Working Paper 8337, Harvard University OpenScholar.
    • Handle: RePEc:qsh:wpaper:8337
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    File URL: http://scholar.harvard.edu/tomasz/node/8337
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    Cited by:

    1. Cerreia-Vioglio, Simone & Maccheroni, Fabio & Marinacci, Massimo & Montrucchio, Luigi, 2012. "Probabilistic sophistication, second order stochastic dominance and uncertainty aversion," Journal of Mathematical Economics, Elsevier, vol. 48(5), pages 271-283.
    2. Jingyi Xue, 2020. "Preferences with changing ambiguity aversion," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(1), pages 1-60, February.
    3. Werner, Jan, 2011. "Risk aversion for variational and multiple-prior preferences," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 382-390.
    4. Liebrich, Felix-Benedikt, 2024. "Are reference measures of law-invariant functionals unique?," Insurance: Mathematics and Economics, Elsevier, vol. 118(C), pages 129-141.
    5. Laeven, Roger J.A. & Rosazza Gianin, Emanuela & Zullino, Marco, 2024. "Law-invariant return and star-shaped risk measures," Insurance: Mathematics and Economics, Elsevier, vol. 117(C), pages 140-153.
    6. Knispel, Thomas & Laeven, Roger J.A. & Svindland, Gregor, 2016. "Robust optimal risk sharing and risk premia in expanding pools," Insurance: Mathematics and Economics, Elsevier, vol. 70(C), pages 182-195.
    7. Grant, Simon & Rich, Patricia & Stecher, Jack, 2022. "Bayes and Hurwicz without Bernoulli," Journal of Economic Theory, Elsevier, vol. 199(C).
    8. Claudia Ravanelli & Gregor Svindland, 2014. "Comonotone Pareto optimal allocations for law invariant robust utilities on L 1," Finance and Stochastics, Springer, vol. 18(1), pages 249-269, January.
    9. Strzalecki, Tomasz & Werner, Jan, 2011. "Efficient allocations under ambiguity," Journal of Economic Theory, Elsevier, vol. 146(3), pages 1173-1194, May.
    10. Liebrich, Felix-Benedikt & Svindland, Gregor, 2019. "Efficient allocations under law-invariance: A unifying approach," Journal of Mathematical Economics, Elsevier, vol. 84(C), pages 28-45.
    11. Sergio Almeida & Marcos Rangel, 2016. "Probabilistic Sophistication, Sources Of Uncertainty, And Cognitive Ability: Experimental Evidence," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 131, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    12. Simone Cerreia-Vioglio & Paolo Ghirardato & Fabio Maccheroni & Massimo Marinacci & Marciano Siniscalchi, 2011. "Rational preferences under ambiguity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 341-375, October.

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