Ambiguity as a Source of Temptation: Modeling Unstable Beliefs

André Lapied () and Thomas Rongiconi ()
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Thomas Rongiconi: Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS

No 1316, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: The "General-Self-Control-Preference" model introduced by Noor and Takeoka (2010) allows to take into account non linear costs of Self-Control. In this paper we extend this theory to situations in which a decision-maker faces ambiguity. We focus on the fact that lack of information is a potential source of temptation. Indeed lack of information doesn't allow the decision-maker to put a probability measure on uncertain events. Our basic hypothesis is that, in ambiguous situation, individuals are not confident enough about their beliefs and could therefore be tempted to use other beliefs to evaluate the alternatives in the second period. We study a two period model where ex ante dominated choice may tempt the decision-maker in the second period. Individuals have preferences over sets of alternatives that represent second period choices. We provide a Choice-Theoretic model where the ex-ante belief is a probability measure whereas ex post belief is a Choquet-capacity, in order to take into account individual attitudes towards ambiguity in the second period.

Keywords: Temptation; Self-control; Ambiguity; Choquet-Expected-Utility; Comonotonic-Temptation-Independence. (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2013-03
New Economics Papers: this item is included in nep-cbe, nep-dcm and nep-upt
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Working Paper: Ambiguity as a Source of Temptation: Modeling Unstable Beliefs (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1316

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