On stochastic independence under ambiguity

Ceron, Federica; Vergopoulos, Vassili

doi:10.1007/s00199-020-01267-z

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Revisiting the Ellsberg Two-urn Paradox1

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2022

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“…A final remark is in order: it would have been equally possible to contradict the Ellsberg choices by invoking Stochastic Independence and its dual version obtained by exchanging the roles of the two sources of uncertainty S 1 and S 2 . See Ceron and Vergopoulos (2021), or also Raiffa (1961) for an analysis of the Ellsberg on-urn experiment in terms of the two dual versions of Stochastic Independence. However, these two dual principles prove to be too weak for our main result, and this explains why we resort to Indifference to Independent Randomization.…”

Section: Revisiting the Ellsberg Two-urn Paradoxmentioning

confidence: 99%

Subjective expected utility through stochastic independence

2022

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This paper studies decision-making in the face of two stochastically independent sources of uncertainty. It characterizes axiomatically a Subjective Expected Utility representation of preferences where subjective beliefs consist of a product probability measure. The two key axioms in this characterization both involve some behavioral notions of stochastic independence. Our result can be understood as a purely subjective version of the Anscombe and Aumann (1963) theorem that avoids the controversial use of exogenous probabilities by appealing to stochastic independence. We also obtain an extension to Choquet Expected Utility representations.

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Section: Revisiting the Ellsberg Two-urn Paradoxmentioning

confidence: 99%