Recursive objective and subjective multiple priors

Federica Ceron () and Vassili Vergopoulos ()
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Federica Ceron: Université Paris Est Créteil
Vassili Vergopoulos: Centre d'Economie de la Sorbonne - Paris School of Economics

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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 (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-05
New Economics Papers: this item is included in nep-mic, nep-ore and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://mse.univ-paris1.fr/pub/mse/CES2020/20008.pdf (application/pdf)
https://halshs.archives-ouvertes.fr/halshs-02900497

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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:20008

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