Second-Order Beliefs and Second-Order Expected Utility

Victor Filipe Martins da Rocha () and Rafael Mouallem
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Victor Filipe Martins da Rocha: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, EESP - Sao Paulo School of Economics - FGV - Fundacao Getulio Vargas [Rio de Janeiro]
Rafael Mouallem: EESP - Sao Paulo School of Economics - FGV - Fundacao Getulio Vargas [Rio de Janeiro]
Authors registered in the RePEc Author Service: V. Filipe Martins-da-Rocha

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Abstract: We present an axiomatization of the Second-Order Expected Utility model in the environment of Anscombe and Aumann (1963) where the domain of the preference relation is the set of lotteries over all acts whose prize are lotteries. We replace the axiom of reversal of order in compound lotteries (Assumption 1 in Anscombe and Aumann (1963)) by an extension of monotonicity in the prizes (Assumption 2 in Anscombe and Aumann (1963)) that is a strengthening of the Dominance axiom introduced by Seo (2009). This extends the contributions of Grant et al. (2009) by allowing for a general representation result without restricting the decision maker's attitude towards subjective uncertainty.

Date: 2020-08-26
New Economics Papers: this item is included in nep-mic and nep-upt
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