Recursive objective and subjective multiple priors

Federica Ceron () and Vassili Vergopoulos ()
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Federica Ceron: UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12
Vassili Vergopoulos: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We provide an axiomatic characterization of recursive Maxmin preferences that stem from (possibly) incomplete preferences representing choices that are justified by hard evidence. The decision-maker disposes of objective probabilistic information that may induce dynamically inconsistent behavior. To ensure that her choices be informed by objective information, dynamically consistent, and ambiguity averse, she constructs her subjective set of priors as the rectangular hull of the objective information set. The characterization builds upon two axioms that naturally combine these three requirements in a behavioral way. Moreover, our main result suggests a principled justification for the use of recursive Maxmin preferences in applications to dynamic choice problems.

Keywords: Rectangularity; Rectangularization; Maxmin Expected Utility; Unanimity Rule; Dynamic Consistency; Prior-by-prior Updating; Objective and Subjective Rationality; Rationalités Objectives et Subjectives; Cohérence Dynamique; Mise à jour Prior par Prior; Règle d'Unanimité; Espérance d'Utilité Maxmin; Rectangularité; Rectangularisation (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-mic and nep-upt
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02900497v1
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Citations: View citations in EconPapers (3)

Published in 2020

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-02900497

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