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Aggregation of not necessarily independent opinions

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  • Marcello Basili

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  • Luca Pratelli

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Abstract

We consider an aggregation scheme of opinions expressed through different probability distributions or multiple priors decision model. The decision-maker adopts entropy maximization as a measure of risk diversification and a rational form of prudence for valuing uncertain outcomes. We show a new aggregation rule formalization based on the idea that the decision-maker has a more reliable set of outcomes called ordinary and two fat tails that include more ambiguous and extreme events.

Suggested Citation

  • Marcello Basili & Luca Pratelli, 2013. "Aggregation of not necessarily independent opinions," Department of Economics University of Siena 677, Department of Economics, University of Siena.
  • Handle: RePEc:usi:wpaper:677
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    File URL: http://repec.deps.unisi.it/quaderni/677.pdf
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    References listed on IDEAS

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    1. Phelim Boyle & Lorenzo Garlappi & Raman Uppal & Tan Wang, 2012. "Keynes Meets Markowitz: The Trade-Off Between Familiarity and Diversification," Management Science, INFORMS, vol. 58(2), pages 253-272, February.
    2. Constantino Tsallis & Celia Anteneodo & Lisa Borland & Roberto Osorio, 2003. "Nonextensive statistical mechanics and economics," Papers cond-mat/0301307, arXiv.org.
    3. Clemon, Robert T & Winkler, Robert L, 1986. "Combining Economic Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 39-46, January.
    4. Marcello Basili & Alain Chateauneuf, 2011. "Extreme events and entropy: A multiple quantile utility model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00685405, HAL.
    5. Robert L. Winkler, 1968. "The Consensus of Subjective Probability Distributions," Management Science, INFORMS, vol. 15(2), pages 61-75, October.
    6. Tsallis, Constantino & Anteneodo, Celia & Borland, Lisa & Osorio, Roberto, 2003. "Nonextensive statistical mechanics and economics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 89-100.
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    Cited by:

    1. Marcello Basili, 2013. "Ellsberg Rules and Keynes’s State of Long-Term Expectation: More Than an Accordance," Department of Economics University of Siena 685, Department of Economics, University of Siena.

    More about this item

    Keywords

    Ambiguity; Aggregation; Entropy; Multiple Priors; Quantiles;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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