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Updating Choquet Beliefs

Jürgen Eichberger, Simon Grant () and David Kelsey

No 607, Discussion Papers from University of Exeter, Department of Economics

Abstract: We apply Pires’s coherence property between unconditional and conditional preferences that admit a CEU representation. In conjunction with consequentialism (only those outcomes on states which are still possible can matter for conditional preference) this implies that the conditional preference may be obtained from the unconditional preference by taking the Full Bayesian Update of the capacity. Attitudes towards sequential versus simultaneous resolution of uncertainty for a simple bet are analyzed. We show that for a class of recursive CEU preferences which exhibit both optimism and pessimism, a 'good-news' signal is preferred to no signal which is preferred to a 'bad-news' signal.

Keywords: updating ambiguous beliefs; Full Bayesian Updating; Choquet Expected Utility; optimism; pessimism; recursive preferences. (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2006
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