Related papers: Partially rational preferences under ambiguity
Nontransitive choices have long been an area of curiosity within economics. However, determining whether nontransitive choices represent an individual's preference is a difficult task since choice data is inherently stochastic. This paper…
Monotonicity and recursivity are central assumptions in intertemporal consumption problems under ambiguity. We show that monotone recursive preferences admit both a recursive and an ex-ante representation, and that the certainty equivalent…
The quality of rationales is essential in the reasoning capabilities of language models. Rationales not only enhance reasoning performance in complex natural language tasks but also justify model decisions. However, obtaining impeccable…
Literature involving preferences of artificial agents or human beings often assume their preferences can be represented using a complete transitive binary relation. Much has been written however on different models of preferences. We review…
We study a simple example of a sequential game illustrating problems connected with making rational decisions that are universal for social sciences. The set of chooser's optimal decisions that manifest his preferences in case of a constant…
Complexity of the problem of choosing among uncertain acts is a salient feature of many of the environments in which departures from expected utility theory are observed. I propose and axiomatize a model of choice under uncertainty in which…
We represent preferences that exhibit absolute or relative attitudes towards ambiguity without assuming convexity of preferences. Our analysis is motivated by the recent experimental evidence by Baillon and Placido (2019) indicating that…
The transitivity of preferences is one of the basic assumptions used in the theory of games and decisions. It is often equated with rationality of choice and is considered useful in building rankings. Intransitive preferences are considered…
In this work we generalize standard Decision Theory by assuming that two outcomes can also be incomparable. Two motivating scenarios show how incomparability may be helpful to represent those situations where, due to lack of information,…
This paper develops a theory of learning under ambiguity induced by the decision maker's beliefs about the collection of data correlated with the true state of the world. Within our framework, two classical results on Bayesian learning…
We elicit incomplete preferences over monetary gambles with subjective uncertainty. Subjects rank gambles, and these rankings are used to estimate preferences; payments are based on estimated preferences. About 40\% of subjects express…
We design and implement lab experiments to evaluate the normative appeal of behavior arising from models of ambiguity-averse preferences. We report two main empirical findings. First, we demonstrate that behavior reflects an incomplete…
Rational decision making in its linguistic description means making logical decisions. In essence, a rational agent optimally processes all relevant information to achieve its goal. Rationality has two elements and these are the use of…
Ambiguity-averse decision makers typically dislike not only the presence of ambiguous events but also their increase, contrary to what standard ambiguity models predict. We axiomatically study such a decision maker. She avoids ex ante…
In this paper the theory of semi-bounded rationality is proposed as an extension of the theory of bounded rationality. In particular, it is proposed that a decision making process involves two components and these are the correlation…
This article introduces a framework for evaluating statistical decisions under both prior ambiguity and likelihood misspecification. We begin with an ambiguity set - a frequentist model that pairs a possibly misspecified likelihood with…
Standard rational expectations models with an occasionally binding zero lower bound constraint either admit no solutions (incoherence) or multiple solutions (incompleteness). This paper shows that deviations from full-information rational…
Humans display a tendency to pay more attention to bad outcomes, often in a disproportionate way relative to their statistical occurrence. They also display euphorism, as well as a preference for the current state of affairs (status quo…
Most of the stochastic orders for comparing random variables, considered in the literature, are afflicted with two main drawbacks: (i) lack of connex property and (ii) lack of consideration of any dependence structure between the random…
A range of empirical puzzles in finance has been explained as a consequence of traders being averse to ambiguity. Ambiguity averse traders can behave in financial portfolio problems in ways that cannot be rationalized as maximizing…