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Probabilistic Sophistication and Variational Preferences

Listed author(s):
  • Tomasz Strzalecki

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.

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File URL: http://scholar.harvard.edu/tomasz/node/8337
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Paper provided by Harvard University OpenScholar in its series Working Paper with number 8337.

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Handle: RePEc:qsh:wpaper:8337
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  1. Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2010. "Probabilistic Sophistication, Second Order Stochastic Dominance, and Uncertainty Aversion," Carlo Alberto Notebooks 174, Collegio Carlo Alberto.
  2. Simon Grant & Atsushi Kajii, 2005. "Probabilistically Sophisticated Multiple Priors," KIER Working Papers 608, Kyoto University, Institute of Economic Research.
  3. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2006. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Econometrica, Econometric Society, vol. 74(6), pages 1447-1498, November.
  4. Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2008. "Uncertainty Averse Preferences," Carlo Alberto Notebooks 77, Collegio Carlo Alberto.
  5. Mark J. Machina & David Schmeidler, 1990. "A More Robust Definition of Subjective Probability," Discussion Paper Serie A 306, University of Bonn, Germany.
  6. Sarin, Rakesh & Wakker, Peter P., 2000. "Cumulative dominance and probabilistic sophistication," Mathematical Social Sciences, Elsevier, vol. 40(2), pages 191-196, September.
  7. Itzhak Gilboa & David Schmeidler, 1989. "Maxmin Expected Utility with Non-Unique Prior," Post-Print hal-00753237, HAL.
  8. Grant, Simon, 1995. "Subjective Probability without Monotonicity: Or How Machina's Mom May Also Be Probabilistically Sophisticated," Econometrica, Econometric Society, vol. 63(1), pages 159-189, January.
  9. Thomas J. Sargent & LarsPeter Hansen, 2001. "Robust Control and Model Uncertainty," American Economic Review, American Economic Association, vol. 91(2), pages 60-66, May.
  10. Massimo Marinacci, 2002. "Probabilistic Sophistication and Multiple Priors," Econometrica, Econometric Society, vol. 70(2), pages 755-764, March.
  11. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  12. Chew Soo Hong & Jacob S. Sagi, 2006. "Event Exchangeability: Probabilistic Sophistication Without Continuity or Monotonicity," Econometrica, Econometric Society, vol. 74(3), pages 771-786, 05.
  13. Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
  14. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
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