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Recursive objective and subjective multiple priors

Author

Listed:
  • Federica Ceron

    (Université Paris Est Créteil)

  • Vassili Vergopoulos

    (Centre d'Economie de la Sorbonne - Paris School of Economics
    https://centredeconomiesorbonne.cnrs.fr)

Abstract
We provide an axiomatic characterization of recursive Maxmin preferences that stem from (possibly) incomplete preferences representing choices that are justified by hard evidence. The decision-maker disposes of objective probabilistic information that may induce dynamically inconsistent behavior. To ensure that her choices be informed by objective information, dynamically consistent, and ambiguity averse, she constructs her subjective set of priors as the rectangular hull of the objective information set. The characterization builds upon two axioms that naturally combine these three requirements in a behavioral way. Moreover, our main result suggests a principled justification for the use of recursive Maxmin preferences in applications to dynamic choice problems

Suggested Citation

  • Federica Ceron & Vassili Vergopoulos, 2020. "Recursive objective and subjective multiple priors," Documents de travail du Centre d'Economie de la Sorbonne 20008, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:20008
    as

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    File URL: http://mse.univ-paris1.fr/pub/mse/CES2020/20008.pdf
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    File URL: https://halshs.archives-ouvertes.fr/halshs-02900497
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    References listed on IDEAS

    as
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    Cited by:

    1. Mira Frick & Ryota Iijima & Yves Le Yaouanq, 2020. "Objective rationality foundations for (dynamic) alpha-MEU," Cowles Foundation Discussion Papers 2244R, Cowles Foundation for Research in Economics, Yale University, revised Jul 2021.
    2. Frick, Mira & Iijima, Ryota & Le Yaouanq, Yves, 2022. "Objective rationality foundations for (dynamic) α-MEU," Journal of Economic Theory, Elsevier, vol. 200(C).

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    More about this item

    Keywords

    Rectangularity; Rectangularization; Maxmin Expected Utility; Unanimity Rule; Dynamic Consistency; Prior-by-prior Updating; Objective and Subjective Rationality;
    All these keywords.

    JEL classification:

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

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