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Robust Bayesian Choice

Lorenzo Stanca

Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: A major concern with Bayesian decision making under uncertainty is the use of a single probability measure to quantify all relevant uncertainty. This paper studies prior robustness as a form of continuity of the value of a decision problem. It is shown that this notion of robustness is characterized by a form of stable choice over a sequence of perturbed decision problems, in which the available acts are perturbed in a precise fashion. Subsequently, a choice-based measure of prior robustness is introduced and applied to portfolio choice and climate mitigation.

Keywords: Risk; Uncertainty; Robustness; Ambiguity; Robust statistics; Prior selection. (search for similar items in EconPapers)
Pages: 54 pages
Date: 2023
New Economics Papers: this item is included in nep-dcm, nep-mic and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:690

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