Subjective Probabilities on Subjectively Unambiguous Events

Larry Epstein and Jiankang Zhang ()

No 99-18, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: The paper suggests a behavioural definition of (subjective) ambiguity in an abstract setting where objects of choice are Savage-style acts. Then axioms are described that deliver probabilistic sophistication of preference on the set of unambiguous acts. In particular, both the domain and the values of the decision-maker's probability measure are dervied from perference, delivering thereby a 'fully subjective' theory of probability. It is argued that the noted result also provides a decision-theoretic foundation for the Knightian distinction between risk and ambiguity and that it provides a unifed framework for analysing attitudes towards risk and towards ambiguity.

Keywords: subjective probability; ambiguity; expected utility; choquet (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 50 pages
Date: 1999-11
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Citations: View citations in EconPapers (11)

Published: – revised version in Econometrica, Vol. 69, No. 2 (March 2001), pp. 265–306

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Journal Article: Subjective Probabilities on Subjectively Unambiguous Events (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:car:carecp:99-18

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