Subjective probability over a subjective decision tree |
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Authors: | Norio Takeoka |
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Affiliation: | Faculty of Economics, Ritsumeikan University, 1-1-1 Noji-Higashi, Kusatsu, Shiga 525-8577, Japan |
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Abstract: | A state space has been assumed as a primitive for modeling uncertainty, which presumes that the analyst knows all the uncertainties a decision maker (DM) perceives. This is problematic because states are private information of the DM, and hence are not directly observable to the analyst. Dekel et al. [Representing preferences with a unique subjective state space, Econometrica 69 (2001) 891-934] derive, rather than assume, the subjective state space from preference over suitable choice objects.In a dynamic setting, a decision tree, that is, a pair consisting of a state space and a filtration, has been taken as a primitive. This assumption is also problematic—a decision tree should be derived rather than assumed as a primitive. We formulate a three-stage extension of the above literature in order to model a DM who anticipates subjective uncertainty to be resolved gradually over time. We identify also subjective beliefs on the subjective state space. |
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Keywords: | D81 |
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