Economics at your fingertips  

Small worlds: Modeling attitudes toward sources of uncertainty

Soo Hong Chew () and Jacob S. Sagi

Journal of Economic Theory, 2008, vol. 139, issue 1, 1-24

Abstract: We introduce the concept of a conditional small world event domain--an extension of Savage's [The Foundations of Statistics, Wiley, New York, 1954] notion of a 'small world'--as a self-contained collection of comparable events. Under weak behavioral conditions we demonstrate probabilistic sophistication in any small world event domain without relying on monotonicity or continuity. Probabilistic sophistication within, though not necessarily across, small worlds provides a foundation for modeling a decision maker that has source-dependent risk attitudes. This also helps formalize the idea of source preference and suggests an interpretation of ambiguity aversion, often associated with Ellsberg-type behavior, in terms of comparative risk aversion across small worlds.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (72) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-10-06
Handle: RePEc:eee:jetheo:v:139:y:2008:i:1:p:1-24