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A Non-Bayesian Theory of State-Dependent Utility
- Source :
- SSRN Electronic Journal.
- Publication Year :
- 2017
- Publisher :
- Elsevier BV, 2017.
-
Abstract
- Many decision situations involve two or more of the following divergences from subjective expected utility: imprecision of beliefs (or ambiguity), imprecision of tastes (or multi-utility), and state dependence of utility. Examples include multi-attribute decisions under uncertainty, such as some climate decisions, where trade-offs across attributes may be state dependent. This paper proposes and characterises a model of uncertainty averse preferences that can simultaneously incorporate all three phenomena. The representation supports a principled separation of (imprecise) beliefs and (potentially state-dependent, imprecise) tastes, and we pinpoint the axiom that ensures such a separation. Moreover, the representation supports comparative statics of both beliefs and tastes, and is modular: it easily delivers special cases involving various combinations of the phenomena, as well as state-dependent multi-utility generalisations of popular ambiguity models.
- Subjects :
- Computer science
business.industry
Comparative statics
media_common.quotation_subject
Bayesian probability
Representation (systemics)
multi-utility
Ambiguity aversion
JEL: D - Microeconomics/D.D8 - Information, Knowledge, and Uncertainty/D.D8.D81 - Criteria for Decision-Making under Risk and Uncertainty
Ambiguity
Subjective expected utility
Modular design
multiple priors
uncertainty aversion
ambiguity
imprecise tastes
[SHS.GESTION]Humanities and Social Sciences/Business administration
business
state-dependent utility
Mathematical economics
Axiom
media_common
Subjects
Details
- ISSN :
- 15565068
- Database :
- OpenAIRE
- Journal :
- SSRN Electronic Journal
- Accession number :
- edsair.doi.dedup.....3f620a5e10ba2323b47f2798ede7cee5