Coping with imprecise information: a decision theoretic approach
Thibault Gajdos (),
Jean-Marc Tallon () and
Jean-Christophe Vergnaud ()
Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)
We provide a model of decision making under uncertainty in which the decision maker reacts to imprecision of the available data. Data is represented by a set of probability distributions. We axiomatize a decision criterion of the maxmin expected utility type, in which the revealed set of priors explicitly depends on the available data. We then characterize notions of comparative aversion to imprecision of the data as well as traditional notions of risk aversion. Interestingly, the study of comparative aversion to imprecision can be done independently of the utility function, which embeds risk attitudes. We also give a more specific result, in which the functional representing the decision maker's preferences is the convex combination of the minimum expected utility with respect to the available data and expected utility with respect to a subjective probability distribution, interpreted as a reference prior. This particular form is shown to be equivalent to some form of constant aversion to imprecision. We finally provide examples of applications first to unanimity rankings of imprecision and risk and then to optimal risk sharing arrangements.
Keywords: Imprecision; ambiguity; uncertainty; decision; multiple priors. (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2002-06, Revised 2004-05
New Economics Papers: this item is included in nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
Working Paper: Coping with Imprecise Information: A Decision Theoretic Approach (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:v04056
Access Statistics for this paper
More papers in Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1) Contact information at EDIRC.
Bibliographic data for series maintained by Lucie Label ().