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410
Preference and Belief: Ambiguity and Competence in Choice under Uncertainty
 JOURNAL OF RISK AND UNCERTAINTY
, 1991
"... We investigate the relation between judgments of probability and preferences between bets. A series of experiments provides support for the competence hypothesis that people prefer betting on their own judgment over an equiprobable chance event when they consider themselves knowledgeable, but not o ..."
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Cited by 305 (6 self)
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We investigate the relation between judgments of probability and preferences between bets. A series of experiments provides support for the competence hypothesis that people prefer betting on their own judgment over an equiprobable chance event when they consider themselves knowledgeable, but not otherwise. They even pay a significant premium to bet on their judgments. These data cannot be explained by aversion to ambiguity, because judgmental probabilities are more ambiguous than chance events. We interpret the results in terms of the attribution of credit and blame. The possibility of inferring beliefs from preferences is questioned. The uncertainty we encounter in the world is not readily quantified. We may feel that our favorite football team has a good chance to win the championship match, that the price of gold will probably go up, and that the incumbent mayor is unlikely to be reelected, but we are normally reluctant to assign numerical probabilities to these events. However, to facilitate communication and enhance the analysis of choice, it is often desirable to quantify uncertainty. The most common procedure for quantifying uncertainty involves expressing belief in the language of chance. When we say that the probability of an uncertain event is 30%, for example, we express the belief that this event is as probable as the drawing of a red ball from a box that contains 30 red and 70 green balls.
EXPECTED UTILITY WITH PURELY SUBJECTIVE NONADDITIVE PROBABILITIES
, 1987
"... Acts are functions from the set of states of the world into the set of consequences. Savage proposed axioms regarding a binary relation on the set of acts which are necessary and sufficient for it to be representable by the functional gu(.)dP for some realvalued (utility) function u on the set of c ..."
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Cited by 217 (2 self)
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Acts are functions from the set of states of the world into the set of consequences. Savage proposed axioms regarding a binary relation on the set of acts which are necessary and sufficient for it to be representable by the functional gu(.)dP for some realvalued (utility) function u on the set of consequences and a (probability) measure P on the set of states of the world. The Ellsberg paradox leads us to reject one of Savage’s main axioms the Sure Thing Principleand develop a more general theory, in which the probability measure need not be additive.
Recursive multiplepriors
, 2003
"... This paper axiomatizes an intertemporal version of multiplepriors utility.A central axiom is dynamic consistency, which leads to a recursive structure for utility, to ‘rectangular ’ sets of priors and to priorbyprior Bayesian updating as the updating rule for such sets of priors.It is argued that ..."
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Cited by 167 (27 self)
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This paper axiomatizes an intertemporal version of multiplepriors utility.A central axiom is dynamic consistency, which leads to a recursive structure for utility, to ‘rectangular ’ sets of priors and to priorbyprior Bayesian updating as the updating rule for such sets of priors.It is argued that dynamic consistency is intuitive in a wide range of situations and that the model is consistent with a rich set of possibilities for dynamic behavior under ambiguity.
Ambiguity Made Precise: A Comparative Foundation
, 2000
"... The theory of subjective expected utility (SEU) has been recently extended to allow ambiguity to matter for choice. We propose a notion of absolute ambiguity aversion by build#wJ on a notion of comparative ambiguity aversion. We characterize it for a preference mo d#w which encompasses some of the m ..."
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Cited by 147 (22 self)
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The theory of subjective expected utility (SEU) has been recently extended to allow ambiguity to matter for choice. We propose a notion of absolute ambiguity aversion by build#wJ on a notion of comparative ambiguity aversion. We characterize it for a preference mo d#w which encompasses some of the most popular mod#wk in the literature. We nextbuild on these id#se to provid# ad efinition of unambiguous actand event, and showthe characterization of the latter. As an illustration, we consider the classical Ellsberg 3color urn problemand find that the notions developed in the paper provide intuitive answers.
Choice under uncertainty with the best and worst in mind: NEOadditive capacities, mimeo, Universität
, 2005
"... Abstract We develop the simplest generalization of subjective expected utility that can accommodate both optimistic and pessimistic attitudes towards uncertaintyChoquet expected utility with nonextremeoutcomeadditive (neoadditive) capacities.A neoadditive capacity can be expressed as the conv ..."
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Cited by 72 (15 self)
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Abstract We develop the simplest generalization of subjective expected utility that can accommodate both optimistic and pessimistic attitudes towards uncertaintyChoquet expected utility with nonextremeoutcomeadditive (neoadditive) capacities.A neoadditive capacity can be expressed as the convex combination of a probability and a special capacity, we refer to as a Hurwicz capacity, that only distinguishes between whether an event is impossible, possible or certain. We show that neoadditive capacities can be readily applied in economic problems, and we provide an axiomatization in a framework of purely subjective uncertainty.
The power of paradox: some recent developments in interactive epistemology
 International Journal of Game Theory
, 2007
"... Abstract Paradoxes of gametheoretic reasoning have played an important role in spurring developments in interactive epistemology, the area in game theory that studies the role of the players ’ beliefs, knowledge, etc. This paper describes two such paradoxes – one concerning backward induction, the ..."
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Cited by 42 (2 self)
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Abstract Paradoxes of gametheoretic reasoning have played an important role in spurring developments in interactive epistemology, the area in game theory that studies the role of the players ’ beliefs, knowledge, etc. This paper describes two such paradoxes – one concerning backward induction, the other iterated weak dominance. We start with the basic epistemic condition of “rationality and common belief of rationality ” in a game, describe various ‘refinements ’ of this condition that have been proposed, and explain how these refinements resolve the two paradoxes. We will see that a unified epistemic picture of game theory emerges. We end with some new foundational questions uncovered by the epistemic program. 1
Fast, frugal, and rational: How rational norms explain behavior
 ORGANIZATIONAL BEHAVIOR AND HUMAN DECISION PROCESSES
, 2003
"... Much research on judgment and decision making has focussed on the adequacy of classical rationality as a description of human reasoning. But more recently it has been argued that classical rationality should also be rejected even as normative standards for human reasoning. For example, Gigerenzer an ..."
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Cited by 38 (1 self)
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Much research on judgment and decision making has focussed on the adequacy of classical rationality as a description of human reasoning. But more recently it has been argued that classical rationality should also be rejected even as normative standards for human reasoning. For example, Gigerenzer and Goldstein (1996) and Gigerenzer and Todd (1999a) argue that reasoning involves ‘‘fast and frugal’ ’ algorithms which are not justified by rational norms, but which succeed in the environment. They provide three lines of argument for this view, based on: (A) the importance of the environment; (B) the existence of cognitive limitations; and (C) the fact that an algorithm with no apparent rational basis, TaketheBest, succeeds in an judgment task (judging which of two cities is the larger, based on lists of features of each city). We reconsider (A)–(C), arguing that standard patterns of explanation in psychology and the social and biological sciences, use rational norms to explain why simple cognitive algorithms can succeed. We also present new computer simulations that compare TaketheBest with other cognitive models (which use connectionist, exemplarbased, and decisiontree algorithms). Although TaketheBest still performs well, it does not perform noticeably better than the other models. We conclude that these results provide no strong reason to prefer TaketheBest over alternative cognitive models.