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A general theory of subjective mixtures

Paolo Ghirardato () and Daniele Pennesi

Journal of Economic Theory, 2020, vol. 188, issue C

Abstract: We provide, and characterize behaviorally, a framework for constructing subjective mixtures which requires neither the Certainty Independence nor the Monotonicity axiom, replacing them with much weaker “local” properties. As we also show by means of examples, this framework provides a purely subjective foundation to most of the recent preference models which employ the Anscombe-Aumann setting. It also allows a subjective formulation of a preference for ambiguity hedging, and as a consequence allows the distinction of the notions of ambiguity aversion and preference for randomization.

Keywords: Subjective mixture space; Ambiguity aversion; Preference for randomization (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:188:y:2020:i:c:s0022053120300545

DOI: 10.1016/j.jet.2020.105056

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