We develop awareness-dependent subjective expected utility by taking unawareness structures introduced in Heifetz, Meier, and Schipper (2006, 2008, 2009) as primitives in the Anscombe-Aumann approach to subjective expected utility. We observe that a decision maker is unaware of an event if and only if her choices reveal that the event is “null” and the negation of the event is “null”. Moreover,...

We investigate the impact of a non-financial background risk ε̃ on the preference rankings between two independent financial risks z̃1 and z̃2 for an expected-utility maximizer. More precisely, we provide necessary and sufficient conditions for the alternative (x0 + z̃1, y0 + ε̃) to be preferred to (x0 + z̃2, y0 + ε̃) whenever (x0 + z̃1, y0) is preferred to (x0 + z̃2, y0). Utility functions that preserv...

In this paper we address the problem of coalition formation in hedonic context. Our modelling tries to be as realistic as possible. In previous models, once an agent joins a coalition it would not be able to leave the coalition and join the new one; in this research we made it possible to leave a coalition but put some restrictions to control the behavior of agents. Leaving or staying of an age...

This research examined whether youth’s forecasted risk taking is best predicted by a compensatory (namely, subjective expected utility) or non-compensatory (e.g., single-factor) model. Ninety youth assessed the importance of perceived benefits, importance of perceived drawbacks, subjective probability of benefits, and subjective probability of drawbacks for 16 risky behaviors clustered evenly i...

Kuhn’s Theorem shows that extensive games with perfect recall can equivalently be analyzed using mixed or behavioral strategies, as long as players are expected utility maximizers. This note constructs an example that illustrates the limits of Kuhn’s Theorem in an environment with ambiguity averse players who use a maxmin decision rule and full Bayesian updating.

We provide a simple proof for the existence of an expected utility representation of a preference relation with an unbounded and continuous utility function. © 2014 Elsevier B.V. All rights reserved.

This paper characterizes properties of chance attitudes (nonadditive measures). It does so for decision under uncertainty (unknown probabilities), where it assumes Choquet expected utility, and for decision under risk (known probabilities), where it assumes rank-dependent utility. It analyzes chance attitude independently from utility. All preference conditions concern simple violations of the ...

In a credit market with enforcement constraints, we study the effects of a change in the outside options of a potential defaulter on the terms of the credit contract, as well as on borrower payoffs. The results crucially depend on the allocation of “bargaining power” between the borrower and the lender. We prove that there is a crucial threshold of relative weights such that if the borrower has...

Under study are games in which players receive private signals and then simultaneously choose actions from compact sets. Payoffs are measurable in signals and jointly continuous in actions. Stinchcombe (2011) [19] proves the existence of correlated equilibria for this class of games. This paper is a study of the information structures for these games, the discontinuous expected utility function...