Objective and Subjective Rationality in a Multiple Prior Model

Itzhak Gilboa (), Fabio Maccheroni, Massimo Marinacci and David Schmeidler ()

No 73, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: A decision maker is characterized by two binary relations. The first reflects decisions that are rational in an “objective” sense: the decision maker can convince others that she is right in making them. The second relation models decisions that are rational in a “subjective” sense: the decision maker cannot be convinced that she is wrong in making them. We impose axioms on these relations that allow a joint representation by a single set of prior probabilities. It is “objectively rational” to choose f in the presence of g if and only if the expected utility of f is at least as high as that of g given each and every prior in the set. It is “subjectively rational” to choose f rather than g if and only if the minimal expected utility of f (relative to all priors in the set) is at least as high as that of g.

Keywords: Rationality; Multiple Priors. (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe and nep-upt
Date: 2008, Revised 2008
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