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Context dependent beliefs

Evan Piermont ()

Journal of Mathematical Economics, 2017, vol. 71, issue C, 63-73

Abstract: This paper examines a model where the set of available outcomes from which a decision maker must choose alters his perception of uncertainty. Specifically, this paper proposes a set of axioms such that each menu induces a subjective belief over an objective state space. The decision maker’s preferences are dependent on the realization of the state. The resulting representation is analogous to state-dependent expected utility within each menu; the beliefs are menu dependent and the utility index is not. Under the interpretation that a menu acts as an informative signal regarding the true state, the paper examines the behavioral restrictions that coincide with different signal structures: elemental (where each element of a menu is a conditionally independent signal) and partitional (where the induced beliefs form a partition of the state space).

Keywords: Menu dependence; Context dependence; Framing; Bayesian signals (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:mateco:v:71:y:2017:i:c:p:63-73