Abstract
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.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 465-488 |
| Number of pages | 24 |
| Journal | Journal of Economic Theory |
| Volume | 159 |
| DOIs | |
| State | Published - 2015 |
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
Keywords
- Allais paradox
- Ambiguity
- Source preference