Purely subjective extended Bayesian models with Knightian unambiguity

Xiangyu Qu

Theory and Decision, 2015, vol. 79, issue 4, 547-571

Abstract: This paper provides a model of belief representation in which ambiguity and unambiguity are endogenously distinguished in a purely subjective setting where objects of choices are, as usual, maps from states to consequences. Specifically, I first extend the maxmin expected utility theory and get a representation of beliefs such that the probabilistic beliefs over each ambiguous event are represented by a non-degenerate interval, while the ones over each unambiguous event are represented by a number. I then consider a class of the biseparable preferences. Two representation results are achieved and can be used to identify the unambiguity in the context of the biseparable preferences. Finally a subjective definition of ambiguity is suggested. It provides a choice theoretic foundation for the Knightian distinction between ambiguity and unambiguity. Copyright Springer Science+Business Media New York 2015

Keywords: Knightian distinction; Maxmin expected utility; Biseparable preference; Unambiguous event; D80; D81 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Purely subjective extended Bayesian models with Knightian unambiguity (2015)
Working Paper: Purely subjective extended Bayesian models with Knightian unambiguity (2015)
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DOI: 10.1007/s11238-015-9489-9

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