A behavioral characterization of plausible priors

Marciano Siniscalchi*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

28 Scopus citations

Abstract

Recent decision theories represent ambiguity via multiple priors, interpreted as alternative probabilistic models of the relevant uncertainty. This paper provides a robust behavioral foundation for this interpretation. A prior P is "plausible" if preferences over some subset of acts admit an expected utility representation with prior P, but not with any other prior Q ≠ P. Under suitable axioms, plausible priors can be elicited from preferences, and fully characterize them; also, probabilistic sophistication implies that there exists only one plausible prior; finally, "plausible posteriors" can be derived via Bayesian updating. Several familiar decision models are consistent with the proposed axioms.

Original languageEnglish (US)
Pages (from-to)1-17
Number of pages17
JournalJournal of Economic Theory
Volume128
Issue number1
DOIs
StatePublished - May 2006

Keywords

  • Ambiguity
  • Maxmin expected utility
  • Multiple priors

ASJC Scopus subject areas

  • Economics and Econometrics

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