Boolean Representations of Preferences under Ambiguity
Mira Frick (),
Ryota Iijima () and
Yves Le Yaouanq ()
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Mira Frick: Cowles Foundation, Yale University, http://economics.yale.edu/people/mira-frick
Ryota Iijima: Cowles Foundation, Yale University, http://economics.yale.edu/people/ryota-iijima
No 2180R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University
We propose a class of multiple-prior representations of preferences under ambiguity where the belief the decision-maker (DM) uses to evaluate an uncertain prospect is the outcome of a game played by two conflicting forces, Pessimism and Optimism. The model does not restrict the sign of the DM’s ambiguity attitude, and we show that it provides a unified framework through which to characterize different degrees of ambiguity aversion, as well as to represent context-dependent negative and positive ambiguity attitudes documented in experiments. We prove that our baseline representation, Boolean expected utility (BEU), yields a novel representation of the class of invariant biseparable preferences (Ghirardato, Maccheroni, and Marinacci, 2004), which drops uncertainty aversion from maxmin expected utility (Gilboa and Schmeidler, 1989), while extensions of BEU allow for more general departures from independence.
Keywords: Ambiguity; Multiple priors; Dual-self models (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2019-06, Revised 2019-07
New Economics Papers: this item is included in nep-mic and nep-upt
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Working Paper: Boolean Representations of Preferences under Ambiguity (2019)
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