Purely subjective revealed ambiguity

Dino Borie

Journal of Mathematical Economics, 2023, vol. 108, issue C

Abstract: The objective of this paper is to show how ambiguity, and an individual’s response to it, can be modeled formally in the context of a likelihood relation over events. When certain structural conditions are met, we introduce the rational core of a likelihood relation and show that it can be represented by a set of priors, as suggested by Ghirardato et al. (2004). We also prove that a general likelihood relation can be represented in the spirit of Hurwicz’s “optimism index” model (Hurwicz, 1951). We then obtain a fully subjective model of likelihood judgments under ambiguity for ambiguity averse individuals.

Keywords: Likelihood relation; Set of priors; Measure; Subjective mixtures; Revealed ambiguity (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:108:y:2023:i:c:s0304406823000666

DOI: 10.1016/j.jmateco.2023.102873

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