Dual‐Self Representations of Ambiguity Preferences

Author:

Chandrasekher Madhav1,Frick Mira2,Iijima Ryota2,Le Yaouanq Yves34

Affiliation:

1. Pinterest, Inc

2. Department of Economics, Yale University

3. Ecole Polytechnique, CREST, Institut Polytechnique de Paris

4. Department of Economics, LMU Munich

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, and to represent the co‐existence of negative and positive ambiguity attitudes within individuals as documented in experiments. We prove that our baseline representation,dual‐self expected utility (DSEU), 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 DSEU allow for more general departures from independence. We also provide foundations for a generalization of prior‐by‐prior belief updating to our model.

Funder

Deutsche Forschungsgemeinschaft

Publisher

The Econometric Society

Subject

Economics and Econometrics

Cited by 13 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

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3. A simple model of two-stage choice;Journal of Mathematical Economics;2024-06

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