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Risk, Ambiguity, and the Separation of Utility and Beliefs

Ghirardato, Paolo and Marinacci, Massimo (2001) Risk, Ambiguity, and the Separation of Utility and Beliefs. Mathematics of Operations Research, 26 (4). pp. 864-890. ISSN 0364-765X. https://resolver.caltech.edu/CaltechAUTHORS:20170809-111620249

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Abstract

We introduce a general model of static choice under uncertainty, arguably the weakest model achieving a separation of cardinal utility and a unique representation of beliefs. Most of the nonexpected utility models existing in the literature are special cases of it. Such separation is motivated by the view that tastes are constant, whereas beliefs change with new information. The model has a simple and natural axiomatization. Elsewhere (forthcoming), we show that it can be very helpful in the characterization of a notion of ambiguity aversion, as separating utility and beliefs allows us to identify and remove aspects of risk attitude from the decision maker's behavior. Here we show that the model allows us to generalize several results on the characterization of risk aversion in betting behavior. These generalizations are of independent interest, as they show that some traditional results for subjective expected utility preferences can be formulated only in terms of binary acts.


Item Type:Article
Related URLs:
URLURL TypeDescription
https://doi.org/10.1287/moor.26.4.864.10002DOIArticle
http://pubsonline.informs.org/doi/abs/10.1287/moor.26.4.864.10002PublisherArticle
http://resolver.caltech.edu/CaltechAUTHORS:20170808-154249780Related ItemWorking Paper
Additional Information:© 2001, INFORMS. Received February 7, 2001; revised July 3, 2001.
Subject Keywords:Decision theory, choice under uncertainty, utility, risk
Issue or Number:4
Classification Code:MSC 2000 subject classification. Primary: 91B06, OR/MS subject classification. Primary: Decision analysis.
Record Number:CaltechAUTHORS:20170809-111620249
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20170809-111620249
Official Citation:Risk, Ambiguity, and the Separation of Utility and Beliefs Paolo Ghirardato and Massimo Marinacci Mathematics of Operations Research 2001 26: 4, 864-890
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80016
Collection:CaltechAUTHORS
Deposited By: Ruth Sustaita
Deposited On:09 Aug 2017 18:28
Last Modified:03 Oct 2019 18:26

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