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Objective and Subjective Rationality in a Multiple Prior Model

Author

Listed:
  • Itzhak Gilboa
  • Fabio Maccheroni
  • Massimo Marinacci
  • David Schmeidler
Abstract
A decision maker is characterized by two binary relations. The first reflects decisions that are rational in an “objective” sense: the decision maker can convince others that she is right in making them. The second relation models decisions that are rational in a “subjective” sense: the decision maker cannot be convinced that she is wrong in making them. We impose axioms on these relations that allow a joint representation by a single set of prior probabilities. It is “objectively rational” to choose f in the presence of g if and only if the expected utility of f is at least as high as that of g given each and every prior in the set. It is “subjectively rational” to choose f rather than g if and only if the minimal expected utility of f (relative to all priors in the set) is at least as high as that of g.

Suggested Citation

  • Itzhak Gilboa & Fabio Maccheroni & Massimo Marinacci & David Schmeidler, 2008. "Objective and Subjective Rationality in a Multiple Prior Model," Carlo Alberto Notebooks 73, Collegio Carlo Alberto, revised 2008.
    • Handle: RePEc:cca:wpaper:73
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Rationality; Multiple Priors.;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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