What were you thinking? Decision theory as coherence test

Itzhak Gilboa and Larry Samuelson ()
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Larry Samuelson: Department of Economics, Yale University

Theoretical Economics, 2022, vol. 17, issue 2

Abstract: Decision theory can be used to test the logic of decision making---one may ask whether a given set of decisions can be justified by a decision-theoretic model. Indeed, in principal-agent settings, such justifications may be required---a manager of an investment fund may be asked what beliefs she used when valuing assets and a government may be asked whether a portfolio of rules and regulations is coherent. In this paper we ask which collections of uncertain-act evaluations can be simultaneously justified under the maxmin expected utility criterion by a single set of probabilities. We draw connections to the the Fundamental Theorem of Finance (for the special case of a Bayesian agent) and revealed-preference results.

Keywords: Decision theory; revealed preference; coherence; maxmin expected utility (search for similar items in EconPapers)
JEL-codes: D8 (search for similar items in EconPapers)
Date: 2022-05-05
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Citations: View citations in EconPapers (3)

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