Probabilistic sophistication and reverse Bayesianism

Karni, Edi; Vierø, Marie‐Louise

doi:10.1007/s11166-015-9216-5

Cited by 25 publications

(15 citation statements)

References 12 publications

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“…The uniqueness of the subjective probabilities is implied by the uniqueness of the subjective probabilities in Proposition 1. 26 (Necessity) The necessity of axioms (A.1) -(A.6) follows from Proposition 1. The necessity of (A.7) is immediate.…”

Section: Proof Of Theoremmentioning

confidence: 98%

Awareness of unawareness: A theory of decision making in the face of ignorance

Karni

Vierø

2017

Journal of Economic Theory

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Section: Proof Of Theoremmentioning

confidence: 98%

Awareness of unawareness: A theory of decision making in the face of ignorance

Karni

Vierø

2017

Journal of Economic Theory

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“…who disagree on what is the set of conceivable states (Karni and Vierø, 2013). In these attempts to accommodate disagreement in a strategic setting, at one point one must confront the fact that two agents who disagree ought to realize that only one of them (at most) can be correct.…”

Section: Introductionmentioning

confidence: 99%

Asset Pricing and Asymmetric Reasoning

Asparouhova

Bossaerts

Eguia

et al. 2015

Journal of Political Economy

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We present a theory and experimental evidence on pricing and portfolio choices under asymmetric reasoning. We show that under asymmetric reasoning, prices do not reflect all (types of) reasoning. Some agents who observe prices that cannot be reconciled with their reasoning switch from perceiving the environment as risky to perceiving it as ambiguous. If ambiguity averse, these agents become priceinsensitive and no longer influence prices directly. We present the results of an experiment and report that consistent with the theory i) mispricing decreases as the fraction of price-sensitive agents increases, and ii) price-insensitive agents trade to more balanced portfolios.

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“…In this literature, states are identified with conjunctions of counterfactuals of the form 'if I were to choose an act a then the consequence c would result'. Discussion can also be found in Gilboa and Schmeidler (1995); Gilboa (2009); Gilboa et al (2009); and Karni and Vierø (2013, 2015a, 2015b).…”

Section: Reality and Perceptionmentioning

confidence: 85%

“…Once the state space is fixed, the choice set may be defined. In Schmeidler and Wakker (1987); Karni and Schmeidler (1991); and Karni and Vierø (2013, 2015a, 2015b, the choice space consists of the original basic actions and the set of conceivable acts (that is, all the mappings from the set of states to the set of feasible consequences). As Gilboa and Schmeidler (1995) note, the cardinality of the set of conceivable acts is twice that of the basic actions.…”

Section: Feasible and Conceivable Actsmentioning

confidence: 99%

States of Nature and the Nature of States

Karni¹

2016

Economics and Philosophy

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A note on versions:The version presented here may differ from the published version or, version of record, if you wish to cite this item you are advised to consult the publisher's version. Please see the 'permanent WRAP url' above for details on accessing the published version and note that access may require a subscription For more information, please contact the WRAP Team at: wrap@warwick.ac.uk "If a tree falls in a forest and no one is around to hear it, does it make a sound?" IntroductionSubjective probability quantifies a decision maker's degree of belief in the likelihoods of events about which reasonable decision makers might disagree. Borel (1924) and Ramsey (1926) proposed the key idea that subjective probabilities may be inferred from the odds a decision maker is willing to offer (or accept) when betting on events or the truth of certain proposition. Both authors require that the event on which a bet is placed be observable, so that the uncertainty is resolved and the payments can be affected. In the words of Borel, "I can in the same way offer to someone who enunciates a judgment capable of verification a bet on his judgment" (Borel 1964: 57).To formalize the idea of resolution of uncertainty, Savage (1954) introduced the idea of state of nature, "a description of the world so complete that, if true and known, the consequences of every action would be known" (Arrow 1971: 45). Implicit in this definition is the notion that there is a unique true state that is fully depicted by the consequences associated with every possible action. In practice, however, decision theorists and economists routinely specify a state space as a primitive constituent of the decision problem. Savage himself applied this "state-first" approach when he wrote, "If two different acts had the same consequences in every state of the world, there would from the present point of view be no point in considering them different acts at all. An act may therefore be identified with its possible consequences. Or, more formally, an act is a function attaching a consequence to each state of the world" (Savage 1954: 14). However, treating the state space as a primitive ingredient of the model tends to conceal critical aspects of the notion of states and imposes tacit and unnecessary restrictions on its usefulness.The purpose of this note is twofold. First, it discusses and elaborates an approach to modeling the resolution of uncertainty described in Fishburn (1970), Schmeidler and Wakker (1987), and Karni and Schmeidler (1991). Second, it examines the implications of this approach for the modeling of the choice set in the theory of decision making under uncertainty. States of Nature Reality and perceptionAlbert Einstein is reported to have asked Niels Bohr whether he believed that the moon does not exist if nobody is looking at it. Bohr replied that however hard he (Einstein) might try, he would not be able to prove that it does. In other words, following Quine (1948Quine ( /1949, an object is a theoretical interpretation of perceived sensory...

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Probabilistic sophistication and reverse Bayesianism

Cited by 25 publications

References 12 publications

Awareness of unawareness: A theory of decision making in the face of ignorance

Awareness of unawareness: A theory of decision making in the face of ignorance

Asset Pricing and Asymmetric Reasoning

States of Nature and the Nature of States

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