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Boolean Representations of Preferences under Ambiguity

Mira Frick, Ryota Iijima and Yves Le Yaouanq ()
Additional contact information
Mira Frick: Yale University
Ryota Iijima: Yale University

No 173, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: 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: multiple priors; ambiguity; dual-self models (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2019-07-30
New Economics Papers: this item is included in nep-mic and nep-upt
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