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A Subjective Spin on Roulette Wheels

Ghirardato, Paolo and Maccheroni, Fabio and Marinacci, Massimo and Sinsicalchi, Marciano (2001) A Subjective Spin on Roulette Wheels. Social Science Working Paper, 1127. California Institute of Technology , Pasadena, CA. (Unpublished)

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We provide a behavioral foundation to the notion of ‘mixture’ of acts, which is used to great advantage in the decision setting introduced by Anscombe and Aumann. Our construction allows one to formulate mixture-space axioms even in a fully subjective setting, without assuming the existence of randomizing devices. This simplifies the task of developing axiomatic models which only use behavioral data. Moreover, it is immune from the difficulty that agents may ‘distort’ the probabilities associated with randomizing devices. For illustration, we present simple subjective axiomatizations of some models of choice under uncertainty, including the maxmin expected utility model of Gilboa and Schmeidler, and Bewley’s model of choice with incomplete preferences.

Item Type:Report or Paper (Working Paper)
Additional Information:An earlier version of this paper was circulated with the title “Subjective Foundations for Objective Randomization: A New Spin on Roulette Wheels”. We thank Mark Machina and the audiences at the V SAET Conference (Ischia, July 2001) and the RUD 2001 Conference (Venezia, July 2001) for helpful comments. Maccheroni thanks the Department of Economics at Boston University and the Division of HSS at Caltech, while Siniscalchi thanks the MEDS Department at the Kellogg Graduate School of Management (Northwestern University), for their hospitality while this paper was being written. Published as Ghirardato, P., Maccheroni, F., Marinacci, M., & Siniscalchi, M. (2003). A subjective spin on roulette wheels. Econometrica, 71(6), 1897-1908.
Group:Social Science Working Papers
Subject Keywords:Roulette Wheels, Subjective Mixtures, Mixture Space, Maxmin Expected Utility, Incomplete Preferences
Series Name:Social Science Working Paper
Issue or Number:1127
Classification Code:JEL: D81
Record Number:CaltechAUTHORS:20170802-170854246
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79801
Deposited By: Jacquelyn Bussone
Deposited On:07 Aug 2017 18:01
Last Modified:03 Oct 2019 18:24

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