Decision Making with Imprecise Probabilistic Information

Thibault Gajdos (), Jean-Marc Tallon () and Jean-Christophe Vergnaud ()

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We develop an axiomatic approach to decision under uncertainty that explicitly takes into account the information available to the decision maker. The information is described by a set of priors and a reference prior. We define a notion of imprecision for this informational setting and show that a decision maker who is averse to information imprecision maximizes the minimum expected utility computed with respect to a subset of the set of initially given priors. The extent to which this set is reduced can be seen as a measure of imprecision aversion. This approach thus allows a lot of flexibility in modelling the decision maker attitude towards imprecision. In contrast, applyingGilboa-Schmeidler [1989] maxmin criterion to the initial set of priors amounts to assuming extreme pessimism.

Keywords: Uncertainty; Decision; Multiple Priors (search for similar items in EconPapers)
Date: Written
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00086021/en/
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Published, Journal of Mathematical Economics, 2004, 40, 6, 647-681

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http://halshs.archives-ouvertes.fr/docs/00/08/60/2 ... Vergnaud-revised.pdf (application/pdf)

Related works:
Working Paper: Decision Making with Imprecise Probabilistic Information (2002)
Working Paper: Decision Making with Imprecise Probabilistic Information (2003)
Journal Article: Decision making with imprecise probabilistic information (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00086021_v1

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