Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
956848 | Journal of Economic Theory | 2015 | 24 Pages |
Abstract
In experiments, subjects are often not indifferent among all sources of uncertainty; between two prospects yielding the same distribution of monetary rewards, they may strictly prefer one over the other. We formulate a special case of α-maxmin expected utility theory in a Savage setting, show that every decision maker perceives multiple subjective sources, and that source-utilities are rank dependent expected utility. A power series identifies each source, measures source-uncertainty, and determines the agent's source-specific risk attitude. Subjective sources relate Ellsberg-paradox behavior to source preference and to Allais-paradox behavior.
Keywords
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Economics and Econometrics
Authors
Faruk Gul, Wolfgang Pesendorfer,