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Purely subjective revealed ambiguity

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  • Borie, Dino

Abstract

The objective of this paper is to show how ambiguity, and an individual’s response to it, can be modeled formally in the context of a likelihood relation over events. When certain structural conditions are met, we introduce the rational core of a likelihood relation and show that it can be represented by a set of priors, as suggested by Ghirardato et al. (2004). We also prove that a general likelihood relation can be represented in the spirit of Hurwicz’s “optimism index” model (Hurwicz, 1951). We then obtain a fully subjective model of likelihood judgments under ambiguity for ambiguity averse individuals.

Suggested Citation

  • Borie, Dino, 2023. "Purely subjective revealed ambiguity," Journal of Mathematical Economics, Elsevier, vol. 108(C).
    • Handle: RePEc:eee:mateco:v:108:y:2023:i:c:s0304406823000666
    DOI: 10.1016/j.jmateco.2023.102873
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    References listed on IDEAS

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    1. Tomasz Strzalecki, 2011. "Axiomatic Foundations of Multiplier Preferences," Econometrica, Econometric Society, vol. 79(1), pages 47-73, January.
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