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Recursive objective and subjective multiple priors

Federica Ceron and Vassili Vergopoulos ()
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Federica Ceron: UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12
Vassili Vergopoulos: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We provide an axiomatic characterization of recursive Maxmin preferences that stem from (possibly) incomplete preferences representing choices that are justified by hard evidence. The decision-maker disposes of objective probabilistic information that may induce dynamically inconsistent behavior. To ensure that her choices be informed by objective information, dynamically consistent, and ambiguity averse, she constructs her subjective set of priors as the rectangular hull of the objective information set. The characterization builds upon two axioms that naturally combine these three requirements in a behavioral way. Moreover, our main result suggests a principled justification for the use of recursive Maxmin preferences in applications to dynamic choice problems.

Keywords: Objective and Subjective Rationality; Prior-by-prior Updating; Dynamic Consistency; Unanimity Rule; Maxmin Expected Utility; Rectangularization; Rectangularity; Règle d'Unanimité; Cohérence Dynamique; Mise à jour Prior par Prior; Rationalités Objectives et Subjectives; Espérance d'Utilité Maxmin; Rectangularité; Rectangularisation (search for similar items in EconPapers)
Date: 2020-05
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-02900497
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Published in 2020

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