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Incomplete Preferences under Uncertainty: Indecisiveness in Beliefs vs. Tastes (2008)
| Citations: | 11 - 2 self |
BibTeX
@MISC{Ok08incompletepreferences,
author = {Efe A. Ok and Pietro Ortoleva and Gil Riella},
title = { Incomplete Preferences under Uncertainty: Indecisiveness in Beliefs vs. Tastes },
year = {2008}
}
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Abstract
We investigate the classical Anscombe-Aumann model of decision-making under uncertainty without assuming the completeness axiom. We deduce the exact nature of preferences in this setup, and give a simple example that shows why one cannot use state-independent utility functions to represent such preferences (even for those that are separable and monotonic). In turn, we distinguish between the dual traits of “indecisiveness in beliefs ” and “indecisiveness in tastes.” The former is captured by the Knightian Uncertainty model while the latter by the single-prior expected multi-utility model. We show how these dual models would jointly obtain on the basis of an ambiguity aversion property, and then show how each model may be deduced from this result in isolation. As an application, we provide a new characterization of the Anscombe-Aumann representation of a preference relation in which we obtain the completeness and monotonicity hypotheses as consequences of a standard ambiguity aversion axiom and completeness of risk preferences alone.
Keyphrases
belief v incomplete preference unpublished manuscript standard ambiguity aversion axiom simple example preference relation ambiguity aversion property knightian uncertainty model dual model dual trait monotonicity hypothesis completeness axiom classical anscombe-aumann model exact nature risk preference single-prior expected multi-utility model cannot use state-independent utility function anscombe-aumann representation new characterization
