IDEAS home Printed from https://ideas.repec.org/a/the/publsh/215.html
   My bibliography  Save this article

Updating preferences with multiple priors

Author

Listed:
  • ,

    (Tel Aviv University)

  • ,

    (Northwestern University)

Abstract

We propose and axiomatically characterize dynamically consistent update rules for decision making under ambiguity. These rules apply to the preferences with multiple priors of Gilboa and Schmeidler (1989), and are the first, for any model of preferences over acts, to be able to reconcile typical behavior in the face of ambiguity (as exemplified by Ellsberg’s paradox) with dynamic consistency for all non-null events. Updating takes the form of applying Bayes’ rule to subsets of the set of priors, where the specific subset depends on the preferences, the conditioning event, and the choice problem (i.e., a feasible set of acts together with an act chosen from that set).

Suggested Citation

  • , & ,, 2007. "Updating preferences with multiple priors," Theoretical Economics, Econometric Society, vol. 2(3), September.
    • Handle: RePEc:the:publsh:215
    as

    Download full text from publisher

    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20070261/1343/61
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Richard Arena & Agnès Festré, 2006. "Knowledge, Beliefs and Economics," Post-Print halshs-00271316, HAL.
    2. Takashi Hayashi, 2005. "Intertemporal substitution, risk aversion and ambiguity aversion," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(4), pages 933-956, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michèle Cohen & Johanna Etner & Meglena Jeleva, 2008. "Dynamic Decision Making when Risk Perception Depends on Past Experience," Theory and Decision, Springer, vol. 64(2), pages 173-192, March.
    2. Katsutoshi Wakai, 2015. "Recursive extension of a multicommodity analysis," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 271-285, October.
    3. , & ,, 2015. "Hidden actions and preferences for timing of resolution of uncertainty," Theoretical Economics, Econometric Society, vol. 10(2), May.
    4. Maccheroni, Fabio & Marinacci, Massimo & Rustichini, Aldo, 2006. "Dynamic variational preferences," Journal of Economic Theory, Elsevier, vol. 128(1), pages 4-44, May.
    5. Tommi Ekholm & Erin Baker, 2022. "Multiple Beliefs, Dominance and Dynamic Consistency," Management Science, INFORMS, vol. 68(1), pages 529-540, January.
    6. Richard Arena, 2015. "On the intellectual foundations of Hayek’s and Schumpeter’s economics: an appraisal," Journal of Evolutionary Economics, Springer, vol. 25(1), pages 77-90, January.
    7. Ghosh, Gagan & Liu, Heng, 2021. "Sequential auctions with ambiguity," Journal of Economic Theory, Elsevier, vol. 197(C).
    8. Klibanoff, Peter & Marinacci, Massimo & Mukerji, Sujoy, 2009. "Recursive smooth ambiguity preferences," Journal of Economic Theory, Elsevier, vol. 144(3), pages 930-976, May.
    9. Katsutoshi Wakai, 2013. "Intertemporal utility smoothing under uncertainty," Theory and Decision, Springer, vol. 74(2), pages 285-310, February.
    10. Robert Nau, 2011. "Risk, ambiguity, and state-preference theory," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 437-467, October.
    11. Zhao, Guihai, 2017. "Confidence, bond risks, and equity returns," Journal of Financial Economics, Elsevier, vol. 126(3), pages 668-688.
    12. Gbaguidi, David, 2012. "La courbe de Phillips : temps d’arbitrage et/ou arbitrage de temps," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(1), pages 87-119, mars.
    13. Galam, Serge & Walliser, Bernard, 2010. "Ising model versus normal form game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(3), pages 481-489.
    14. André Orléan, 2012. "Knowledge in Finance: Objective Value versus Convention," Chapters, in: Richard Arena & Agnès Festré & Nathalie Lazaric (ed.), Handbook of Knowledge and Economics, chapter 14, Edward Elgar Publishing.
    15. Johanna Etner & Meglena Jeleva & Jean‐Marc Tallon, 2012. "Decision Theory Under Ambiguity," Journal of Economic Surveys, Wiley Blackwell, vol. 26(2), pages 234-270, April.
    16. Flynn, Joel P. & Schmidt, Lawrence D. W. & Toda, Alexis Akira, 2023. "Robust comparative statics for the elasticity of intertemporal substitution," Theoretical Economics, Econometric Society, vol. 18(1), January.
    17. Martin Schneider, 2010. "The Research Agenda: Martin Schneider on Multiple Priors Preferences and Financial Markets," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 11(2), April.
    18. Agnès Festré, 2012. "Carl Menger and Friedrich von Wieser on the Role of Knowledge and Beliefs in the Emergence and Evolution of Institutions," Chapters, in: Richard Arena & Agnès Festré & Nathalie Lazaric (ed.), Handbook of Knowledge and Economics, chapter 4, Edward Elgar Publishing.
    19. Spyros Galanis, 2021. "Dynamic consistency, valuable information and subjective beliefs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1467-1497, June.
    20. Wang, Jessie J. & Lalwani, Ashok K. & DelVecchio, Devon, 2022. "The Impact of Power Distance Belief on Consumers' Brand Preferences," International Journal of Research in Marketing, Elsevier, vol. 39(3), pages 804-823.

    More about this item

    Keywords

    Updating; dynamic consistency; ambiguity; Ellsberg; Bayesian; consequentialism;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:the:publsh:215. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin J. Osborne (email available below). General contact details of provider: http://econtheory.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.