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Objective and Subjective Rationality in a Multiple Prior Model

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  • Gilboa, Itzhak
  • Maccheroni, Fabio
  • Marinacciand, Massimo
  • Schmeidler, David
Abstract
A decision maker is characterized by two binary relations. The first reflects decisions that are rational in an “objective” sense: the decision maker can convince others that she is right in making them. The second relation models decisions that are rational in a “subjective” sense: the decision maker cannot be convinced that she is wrong in making them. We impose axioms on these relations that allow a joint representation by a single set of prior probabilities. It is “objectively rational” to choose f in the presence of g if and only if the expected utility of f is at least as high as that of g given each and every prior in the set. It is “subjectively rational” to choose f rather than g if and only if the minimal expected utility of f (relative to all priors in the set) is at least as high as that of g.

Suggested Citation

  • Gilboa, Itzhak & Maccheroni, Fabio & Marinacciand, Massimo & Schmeidler, David, 2009. "Objective and Subjective Rationality in a Multiple Prior Model," Foerder Institute for Economic Research Working Papers 275721, Tel-Aviv University > Foerder Institute for Economic Research.
    • Handle: RePEc:ags:isfiwp:275721
    DOI: 10.22004/ag.econ.275721
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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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