IDEAS home Printed from https://ideas.repec.org/a/kap/jrisku/v50y2015i3p189-208.html
   My bibliography  Save this article

Probabilistic sophistication and reverse Bayesianism

Author

Listed:
  • Edi Karni
  • Marie-Louise Vierø

Abstract

This paper extends our earlier work on reverse Bayesianism by relaxing the assumption that decision makers abide by expected utility theory, assuming instead weaker axioms that merely imply that they are probabilistically sophisticated. We show that our main results, namely, (modified) representation theorems and corresponding rules for updating beliefs over expanding state spaces and null events that constitute “reverse Bayesianism,” remain valid. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Edi Karni & Marie-Louise Vierø, 2015. "Probabilistic sophistication and reverse Bayesianism," Journal of Risk and Uncertainty, Springer, vol. 50(3), pages 189-208, June.
    • Handle: RePEc:kap:jrisku:v:50:y:2015:i:3:p:189-208
    DOI: 10.1007/s11166-015-9216-5
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11166-015-9216-5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11166-015-9216-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Machina Mark J. & Schmeidler David, 1995. "Bayes without Bernoulli: Simple Conditions for Probabilistically Sophisticated Choice," Journal of Economic Theory, Elsevier, vol. 67(1), pages 106-128, October.
    2. Edi Karni & Marie-Louise Vier?, 2013. ""Reverse Bayesianism": A Choice-Based Theory of Growing Awareness," American Economic Review, American Economic Association, vol. 103(7), pages 2790-2810, December.
    3. Gul, Faruk, 1991. "A Theory of Disappointment Aversion," Econometrica, Econometric Society, vol. 59(3), pages 667-686, May.
    4. Epstein, Larry G. & Schneider, Martin, 2003. "Recursive multiple-priors," Journal of Economic Theory, Elsevier, vol. 113(1), pages 1-31, November.
    5. Grant, Simon & Polak, Ben, 2006. "Bayesian beliefs with stochastic monotonicity: An extension of Machina and Schmeidler," Journal of Economic Theory, Elsevier, vol. 130(1), pages 264-282, September.
    6. Pietro Ortoleva, 2012. "Modeling the Change of Paradigm: Non-Bayesian Reactions to Unexpected News," American Economic Review, American Economic Association, vol. 102(6), pages 2410-2436, October.
    7. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    8. Machina, Mark J & Schmeidler, David, 1992. "A More Robust Definition of Subjective Probability," Econometrica, Econometric Society, vol. 60(4), pages 745-780, July.
    9. Karni, Edi & Schmeidler, David, 1991. "Utility theory with uncertainty," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 33, pages 1763-1831, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Díaz, Antonio & Esparcia, Carlos, 2021. "Dynamic optimal portfolio choice under time-varying risk aversion," International Economics, Elsevier, vol. 166(C), pages 1-22.
    2. Dominiak, Adam & Tserenjigmid, Gerelt, 2018. "Belief consistency and invariant risk preferences," Journal of Mathematical Economics, Elsevier, vol. 79(C), pages 157-162.
    3. Vierø, Marie-Louise, 2021. "An intertemporal model of growing awareness," Journal of Economic Theory, Elsevier, vol. 197(C).
    4. Chakravarty, Surajeet & Kelsey, David & Teitelbaum, Joshua C., 2022. "Reverse Bayesianism and act independence," Journal of Economic Theory, Elsevier, vol. 203(C).
    5. Karni, Edi & Vierø, Marie-Louise, 2017. "Awareness of unawareness: A theory of decision making in the face of ignorance," Journal of Economic Theory, Elsevier, vol. 168(C), pages 301-328.
    6. Christoph K. Becker & Tigran Melkonyan & Eugenio Proto & Andis Sofianos & Stefan T. Trautmann, 2020. "Reverse Bayesianism: Revising Beliefs in Light of Unforeseen Events," CESifo Working Paper Series 8662, CESifo.
    7. Pamela Giustinelli & Nicola Pavoni, 2017. "The Evolution of Awareness and Belief Ambiguity in the Process of High School Track Choice," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 93-120, April.
    8. Grant Simon & Guerdjikova Ani & Quiggin John, 2021. "Ambiguity and Awareness: A Coherent Multiple Priors Model," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 21(2), pages 571-612, June.
    9. Adam Dominiak & Ani Guerdjikova, 2021. "Pessimism and optimism towards new discoveries," Theory and Decision, Springer, vol. 90(3), pages 321-370, May.
    10. Dominiak, Adam & Tserenjigmid, Gerelt, 2022. "Ambiguity under growing awareness," Journal of Economic Theory, Elsevier, vol. 199(C).
    11. Surajeet Chakravarty & David Kelsey & Joshua C. Teitelbaum, 2020. "Operationalizing Reverse Bayesianism," Discussion Papers 2020-18, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    12. Marcus Pivato, 2020. "Subjective expected utility with a spectral state space," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(2), pages 249-313, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dominiak, Adam & Tserenjigmid, Gerelt, 2022. "Ambiguity under growing awareness," Journal of Economic Theory, Elsevier, vol. 199(C).
    2. Becker, Christoph K. & Melkonyan, Tigran & Proto, Eugenio & Sofianos, Andis & Trautmann, Stefan T., 2020. "Reverse Bayesianism: Revising Beliefs in Light of Unforeseen Events," IZA Discussion Papers 13821, Institute of Labor Economics (IZA).
    3. ALLARD, Marie & BRONSARD, Camille & GOURIÉROUX Christian, 2003. "Aversion Analysis," Cahiers de recherche 2003-06, Universite de Montreal, Departement de sciences economiques.
      • ALLARD, Marie & BRONSARD, Camille & GOURIÉROUX, Christian, 2003. "Aversion Analysis," Cahiers de recherche 04-2003, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    4. 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.
    5. Grant, Simon & Özsoy, Hatice & Polak, Ben, 2008. "Probabilistic sophistication and stochastic monotonicity in the Savage framework," Mathematical Social Sciences, Elsevier, vol. 55(3), pages 371-380, May.
    6. Ilke Aydogan & Loic Berger & Valentina Bosetti & Ning Liu, 2018. "Three layers of uncertainty: an experiment," Working Papers 623, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    7. Qu, Xiangyu, 2017. "Subjective mean–variance preferences without expected utility," Mathematical Social Sciences, Elsevier, vol. 87(C), pages 31-39.
    8. Evren, Özgür, 2019. "Recursive non-expected utility: Connecting ambiguity attitudes to risk preferences and the level of ambiguity," Games and Economic Behavior, Elsevier, vol. 114(C), pages 285-307.
    9. Karni, Edi & Vierø, Marie-Louise, 2017. "Awareness of unawareness: A theory of decision making in the face of ignorance," Journal of Economic Theory, Elsevier, vol. 168(C), pages 301-328.
    10. Grant, Simon & Rich, Patricia & Stecher, Jack, 2022. "Bayes and Hurwicz without Bernoulli," Journal of Economic Theory, Elsevier, vol. 199(C).
    11. Cheng, Xiaoyu, 2022. "Relative Maximum Likelihood updating of ambiguous beliefs," Journal of Mathematical Economics, Elsevier, vol. 99(C).
    12. Dean, Mark & Ortoleva, Pietro, 2017. "Allais, Ellsberg, and preferences for hedging," Theoretical Economics, Econometric Society, vol. 12(1), January.
    13. Dominiak, Adam & Tserenjigmid, Gerelt, 2018. "Belief consistency and invariant risk preferences," Journal of Mathematical Economics, Elsevier, vol. 79(C), pages 157-162.
    14. Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2004. "Rationality of Belief Or: Why Savage's axioms are neither necessary nor sufficient for rationality, Second Version," PIER Working Paper Archive 07-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Jan 2007.
    15. Constantinos Antoniou & Glenn Harrison & Morten Lau & Daniel Read, 2015. "Subjective Bayesian beliefs," Journal of Risk and Uncertainty, Springer, vol. 50(1), pages 35-54, February.
    16. Itzhak Gilboa & Andrew Postlewaite & David Schmeidler, 2004. "Rationality of Belief Or: Why Savage's axioms are neither necessary nor sufficient for rationality, Second Version," PIER Working Paper Archive 07-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Jan 2007.
    17. Harrison, Glenn W. & Martínez-Correa, Jimmy & Swarthout, J. Todd, 2014. "Eliciting subjective probabilities with binary lotteries," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 128-140.
    18. Li, Jian, 2020. "Preferences for partial information and ambiguity," Theoretical Economics, Econometric Society, vol. 15(3), July.
    19. Karni, Edi & Maccheroni, Fabio & Marinacci, Massimo, 2015. "Ambiguity and Nonexpected Utility," Handbook of Game Theory with Economic Applications,, Elsevier.
    20. Adam Dominiak & Jean-Philippe Lefort, 2021. "Ambiguity and Probabilistic Information," Management Science, INFORMS, vol. 67(7), pages 4310-4326, July.

    More about this item

    Keywords

    Awareness; Unawareness; Reverse Bayesianism; Probabilistic sophistication; D8; D81; D83;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:50:y:2015:i:3:p:189-208. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.