We provide, and characterize behaviorally, a framework for constructing subjective mixtures which requires neither the Certainty Independence nor the Monotonicity axiom, replacing them with much weaker ``local'' properties. As we also show by means of examples, this framework provides a purely subjective foundation to most of the recent preference models which employ the Anscombe-Aumann setting. It also allows a subjective formulation of a preference for ambiguity hedging, and as a consequence allows the distinction of the notions of ambiguity aversion and preference for randomization.

A General Theory of Subjective Mixtures

Paolo Ghirardato
;
Daniele Pennesi
2020

Abstract

We provide, and characterize behaviorally, a framework for constructing subjective mixtures which requires neither the Certainty Independence nor the Monotonicity axiom, replacing them with much weaker ``local'' properties. As we also show by means of examples, this framework provides a purely subjective foundation to most of the recent preference models which employ the Anscombe-Aumann setting. It also allows a subjective formulation of a preference for ambiguity hedging, and as a consequence allows the distinction of the notions of ambiguity aversion and preference for randomization.
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Subjective Mixture Space, Ambiguity Aversion, Preference for Randomization
Paolo Ghirardato, Daniele Pennesi
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2318/1690404
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