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Decision-Making in the Context of Imprecise Probabilistic Beliefs

Klaus Nehring

No 34, Economics Working Papers from Institute for Advanced Study, School of Social Science

Abstract: Coherent imprecise probabilistic beliefs are modelled as incomplete comparative likelihood relations admitting a multiple-prior representation. Under a structural assumption of Equidivisibility, we provide an axiomatization of such relations and show uniqueness of the representation. In the second part of the paper, we formulate a behaviorally general axiom relating preferences and probabilistic beliefs which implies that preferences over unambiguous acts are probabilistically sophisticated and which entails representability of preferences over Savage acts in an Anscombe-Aumann-style framework. The motivation for an explicit and separate axiomatization of beliefs for the study of decision-making under ambiguity is discussed in some detail.

Pages: 52 pages
Date: 2006-04
New Economics Papers: this item is included in nep-gth, nep-knm and nep-upt
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