Risk, Ambiguity, and the Separation of Utility and Beliefs

Risk, Ambiguity, and the Separation of Utility and Beliefs

We introduce a general model of static choice under uncertainty, arguably the weakest model achieving a separation of cardinal utility and a unique representation of beliefs. Most of the nonexpected utility models existing in the literature are special cases of it. Such separation is motivated by th...

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Veröffentlicht in:Mathematics of Operations Research. - Institute for Operations Research and the Management Sciences. - 26(2001), 4, Seite 864-890
1. Verfasser: Ghirardato, Paolo (VerfasserIn)
Weitere Verfasser: Marinacci, Massimo
Format: Online-Aufsatz
Sprache:English
Veröffentlicht: 2001
Zugriff auf das übergeordnete Werk:Mathematics of Operations Research
Schlagworte:Decision theory Choice under uncertainty Utility Risk Behavioral sciences Economics Mathematics Philosophy
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520 |a We introduce a general model of static choice under uncertainty, arguably the weakest model achieving a separation of cardinal utility and a unique representation of beliefs. Most of the nonexpected utility models existing in the literature are special cases of it. Such separation is motivated by the view that tastes are constant, whereas beliefs change with new information. The model has a simple and natural axiomatization. Elsewhere (forthcoming), we show that it can be very helpful in the characterization of a notion of ambiguity aversion, as separating utility and beliefs allows us to identify and remove aspects of risk attitude from the decision maker's behavior. Here we show that the model allows us to generalize several results on the characterization of risk aversion in betting behavior. These generalizations are of independent interest, as they show that some traditional results for subjective expected utility preferences can be formulated only in terms of binary acts. 
540 |a Copyright 2001 Institute for Operations Research and the Management Sciences 
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650 4 |a Choice under uncertainty 
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