IDEAS home Printed from https://ideas.repec.org/p/chu/wpaper/24-15.html
   My bibliography  Save this paper

Generalized NEO-EU Preferences and the Falsifability of Ambiguity Theories

Author

Listed:
  • Manuel Nunez

    (University of Connecticut)

  • Mark Schneider

    (University of Alabama and Economic Science Institute, Chapman University)

Abstract

Axiomatic non-expected utility models are generally more difficult to falsify than expected utility theory as they are less restrictive (by weakening the independence axiom). Recent work computes the Vapnik-Chervonenkis (VC) dimension of a theory to determine the extent to which the theory is falsifiable. Popular ambiguity theories have VC dimensions that increase exponentially in the number of states or that are infinite, whereas the VC dimension of expected utility theory increases linearly in the number of states. In this paper we axiomatically characterize the class of generalized non-extreme outcome expected utility (NEO-EU) preferences in the Anscombe-Aumann framework and show that their VC dimension increases linearly in the number of states. Our paper shows that this popular class of ambiguity preferences which has been broadly applied provides a counter-example to the conjecture that axiomatic models of ambiguity attitudes are substantially more difficult to falsify than expected utility theory.

Suggested Citation

  • Manuel Nunez & Mark Schneider, 2024. "Generalized NEO-EU Preferences and the Falsifability of Ambiguity Theories," Working Papers 24-15, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:24-15
    as

    Download full text from publisher

    File URL: https://digitalcommons.chapman.edu/esi_working_papers/411/
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Generalized NEO-EU; Choice under Ambiguity; Decision Theory;
    All these keywords.

    JEL classification:

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

    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:chu:wpaper:24-15. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Megan Luetje (email available below). General contact details of provider: https://edirc.repec.org/data/esichus.html .

    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.