Purely subjective variational preferences

Craig Webb

doi:10.1007/s00199-016-1003-2

Purely subjective variational preferences

Craig Webb

Economics

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Abstract

Variational preferences (Maccheroni, Marinacci and Rustichini, 2006) are an important class of ambiguity averse preferences, compatible with Ellsberg-type phenomena. In this paper, a new foundation for variational preferences is derived in a framework of two-stages of purely subjective uncertainty. A similar foundation is obtained for purely subjective maxmin expected utility (Gilboa and Schmeidler, 1989). By establishing their axiomatic foundations without the use of extraneous probabilities, the conceptual appeal and applicability of these ambiguity models is enhanced. Keywords: Variational preferences, ambiguity aversion, subjective uncertainty.
JEL Classification: D81

Original language	English
Pages (from-to)	121–137
Journal	Economic Theory
Volume	64
DOIs	https://doi.org/10.1007/s00199-016-1003-2
Publication status	Published - 5 Oct 2016

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abstract = "Variational preferences (Maccheroni, Marinacci and Rustichini, 2006) are an important class of ambiguity averse preferences, compatible with Ellsberg-type phenomena. In this paper, a new foundation for variational preferences is derived in a framework of two-stages of purely subjective uncertainty. A similar foundation is obtained for purely subjective maxmin expected utility (Gilboa and Schmeidler, 1989). By establishing their axiomatic foundations without the use of extraneous probabilities, the conceptual appeal and applicability of these ambiguity models is enhanced. Keywords: Variational preferences, ambiguity aversion, subjective uncertainty.JEL Classification: D81",

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AB - Variational preferences (Maccheroni, Marinacci and Rustichini, 2006) are an important class of ambiguity averse preferences, compatible with Ellsberg-type phenomena. In this paper, a new foundation for variational preferences is derived in a framework of two-stages of purely subjective uncertainty. A similar foundation is obtained for purely subjective maxmin expected utility (Gilboa and Schmeidler, 1989). By establishing their axiomatic foundations without the use of extraneous probabilities, the conceptual appeal and applicability of these ambiguity models is enhanced. Keywords: Variational preferences, ambiguity aversion, subjective uncertainty.JEL Classification: D81

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Purely subjective variational preferences

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