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Expected balanced uncertain utility

Author

Listed:
  • Grant, Simon

    (Research School of Economics, Australian National University)

  • Roorda, Berend

    (Department of Economics, University Twente)

  • Yang, Jingni

    (School of Economics, University of Sydney)

Abstract

We introduce and analyze expected balanced uncertain utility (EBUU) theory. A prior and a balanced outcome-set utility characterize an EBUU decision maker. Conditional on a reference or ``balancing value'', the latter assigns a utility to each outcome-set. The decision maker associates with each act, its envelope, the minimal measurable mapping from states to outcome-sets that contains the act. She then (implicitly) ranks an act according to the balancing value at which the expected balanced utility of its associated envelope is zero. As a consequence her risk preferences need only exhibit betweenness allowing or behavior that can accommodate Allais-type paradoxes.

Suggested Citation

  • Grant, Simon & Roorda, Berend & Yang, Jingni, 0. "Expected balanced uncertain utility," Theoretical Economics, Econometric Society.
    • Handle: RePEc:the:publsh:5404
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    References listed on IDEAS

    as
    1. Grant, Simon, 1995. "Subjective Probability without Monotonicity: Or How Machina's Mom May Also Be Probabilistically Sophisticated," Econometrica, Econometric Society, vol. 63(1), pages 159-189, January.
    2. Dekel, Eddie, 1986. "An axiomatic characterization of preferences under uncertainty: Weakening the independence axiom," Journal of Economic Theory, Elsevier, vol. 40(2), pages 304-318, December.
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    More about this item

    Keywords

    Uncertainty; ambiguity; betweenness;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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