Purely subjective extended Bayesian models with Knightian unambiguity

Xiangyu Qu (1)

1 CES - Centre d'économie de la Sorbonne

This paper provides a model of belief representation in which ambiguity and unambiguity are endogenously distinguished in a purely subjective setting where objects of choices are, as usual, maps from states to consequences. Specifically, I first extend the maxmin expected utility theory and get a representation of beliefs such that the probabilistic beliefs over each ambiguous event are represented by a non-degenerate interval, while the ones over each unambiguous event are represented by a number. I then consider a class of the biseparable preferences. Two representation results are achieved and can be used to identify the unambiguity in the context of the biseparable preferences. Finally a subjective definition of ambiguity is suggested. It provides a choice theoretic foundation for the Knightian distinction between ambiguity and unambiguity.

Mots clés: Knightian distinction; Maxmin expected utility; Biseparable preference; Unambiguous event

Domaines: Economies et finances

Xiangyu Qu. Purely subjective extended Bayesian models with Knightian unambiguity. Theory and Decision, 2015, 79 (4), pp.547-571. ⟨10.1007/s11238-015-9489-9⟩. ⟨hal-01437537⟩