TY - JOUR
T1 - Hurwicz expected utility and subjective sources
AU - Gul, Faruk
AU - Pesendorfer, Wolfgang
N1 - Publisher Copyright:
© 2015 Elsevier Inc.
PY - 2015
Y1 - 2015
N2 - In experiments, subjects are often not indifferent among all sources of uncertainty; between two prospects yielding the same distribution of monetary rewards, they may strictly prefer one over the other. We formulate a special case of α-maxmin expected utility theory in a Savage setting, show that every decision maker perceives multiple subjective sources, and that source-utilities are rank dependent expected utility. A power series identifies each source, measures source-uncertainty, and determines the agent's source-specific risk attitude. Subjective sources relate Ellsberg-paradox behavior to source preference and to Allais-paradox behavior.
AB - In experiments, subjects are often not indifferent among all sources of uncertainty; between two prospects yielding the same distribution of monetary rewards, they may strictly prefer one over the other. We formulate a special case of α-maxmin expected utility theory in a Savage setting, show that every decision maker perceives multiple subjective sources, and that source-utilities are rank dependent expected utility. A power series identifies each source, measures source-uncertainty, and determines the agent's source-specific risk attitude. Subjective sources relate Ellsberg-paradox behavior to source preference and to Allais-paradox behavior.
KW - Allais paradox
KW - Ambiguity
KW - Source preference
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U2 - 10.1016/j.jet.2015.05.007
DO - 10.1016/j.jet.2015.05.007
M3 - Article
AN - SCOPUS:84938151479
SN - 0022-0531
VL - 159
SP - 465
EP - 488
JO - Journal of Economic Theory
JF - Journal of Economic Theory
ER -