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  1.  6
    Pessimism and Optimism Towards New Discoveries.Adam Dominiak & Ani Guerdjikova - 2021 - Theory and Decision 90 (3-4):321-370.
    In this paper, we provide an axiomatic foundation of pessimism and optimism towards ambiguity that emerges due to growing awareness. In our setup, this corresponds to a discovery of finer “descriptions” of the original contingencies. A decision-maker can form subjective probabilistic beliefs on the original state space and behaves as an expected utility maximizer. However, as finer contingencies are discovered, he may perceive ambiguity with respect to the newly identified states and thus be unable to extend her initial probabilistic beliefs (...)
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  2. Special Issue on Ambiguity and Strategic Interactions in Honor of Jürgen Eichberger.Adam Dominiak & Ani Guerdjikova - 2021 - Theory and Decision 90 (3-4):301-307.
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  3.  3
    Objective and Subjective Rationality and Decisions with the Best and Worst Case in Mind.Simon Grant, Patricia Rich & Jack Stecher - 2021 - Theory and Decision 90 (3-4):309-320.
    We study decision under uncertainty in an Anscombe–Aumann framework. Two binary relations characterize a decision-maker: one incomplete relation, reflecting her objective rationality, and a second complete relation, reflecting her subjective rationality. We require the latter to be an extension of the former. Our key axiom is a dominance condition. Our main theorem provides a representation of the two relations. The objectively rational relation has a Bewley-style multiple prior representation. Using this set of priors, we fully characterize the subjectively rational relation (...)
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  4.  3
    Correction To: Persuasion Under Ambiguity.Jonas Hedlund, T. Florian Kauffeldt & Malte Lammert - 2021 - Theory and Decision 90 (3-4):483-483.
    In Proposition 4, lines 3, 4 and 8, 9 were scrambled by mistake during the pagination process of the online published article.
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  5.  5
    Persuasion Under Ambiguity.Jonas Hedlund, T. Florian Kauffeldt & Malte Lammert - 2021 - Theory and Decision 90 (3-4):455-482.
    This paper introduces a receiver who perceives ambiguity in a binary model of Bayesian persuasion. The sender has a well-defined prior, while the receiver considers an interval of priors and maximizes a convex combination of worst and best expected payoffs. We characterize the sender’s optimal signal and find that the receiver’s payoff differences across states given each action, play a fundamental role in the characterization and the comparative statics. If the sender’s preferred action is the least sensitive one, then the (...)
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  6.  3
    Put–Call Parity and Generalized Neo-Additive Pricing Rules.Emy Lécuyer & Jean-Philippe Lefort - 2021 - Theory and Decision 90 (3-4):521-542.
    We study price formulas suited for empirical research in financial markets in which put–call parity is satisfied. We find a connection between risk and the bid–ask spread. We further study the compatibility of the model with market frictions, and determine market subsets where the Fundamental Theorem of Asset Pricing applies. Finally, we characterize the price formula.
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  7.  2
    Savage Vs. Anscombe-Aumann: An Experimental Investigation of Ambiguity Frameworks.Jörg Oechssler & Alex Roomets - 2021 - Theory and Decision 90 (3-4):405-416.
    The Savage and the Anscombe–Aumann frameworks are the two most popular approaches used when modeling ambiguity. The former is more flexible, but the latter is often preferred for its simplicity. We conduct an experiment where subjects place bets on the joint outcome of an ambiguous urn and a fair coin. We document that more than a third of our subjects make choices that are incompatible with Anscombe–Aumann for any preferences, while the Savage framework is flexible enough to account for subjects’ (...)
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  8.  4
    Ambiguity When Playing Coordination Games Across Cultures.Joanne Peryman & David Kelsey - 2021 - Theory and Decision 90 (3-4):485-505.
    Cultural differences can be a source of ambiguity in coordination games. As players are likely to experience more ambiguity when playing a different culture, we expect players to choose safer strategies. We run experiments with a stag hunt and bargaining coordination game. Using a between-subjects design, we vary the identity of the opponent between someone of the same culture or a different culture. We compare the responses of British and East Asian students at the University of Exeter and show the (...)
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  9.  1
    Feddersen and Pesendorfer Meet Ellsberg.Matthew Ryan - 2021 - Theory and Decision 90 (3-4):543-577.
    The Condorcet Jury Theorem formalises the “wisdom of crowds”: binary decisions made by majority vote are asymptotically correct as the number of voters tends to infinity. This classical result assumes like-minded, expected utility maximising voters who all share a common prior belief about the right decision. Ellis : 865–895, 2016) shows that when voters have ambiguous prior beliefs—a set of priors—and follow maxmin expected utility, such wisdom requires that voters’ beliefs satisfy a “disjoint posteriors” condition: different private signals lead to (...)
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  10.  2
    The Evolutionary Stability of Optimism, Pessimism, and Complete Ignorance.Burkhard C. Schipper - 2021 - Theory and Decision 90 (3-4):417-454.
    We seek an evolutionary explanation for why in some situations humans maintain either optimistic or pessimistic attitudes toward uncertainty and are ignorant to relevant aspects of their environment. Players in strategic games face Knightian uncertainty about opponents’ actions and maximize individually their Choquet expected utility with respect to neo-additive capacities allowing for both an optimistic or pessimistic attitude toward uncertainty as well as ignorance to strategic dependencies. An optimist overweighs good outcomes. A complete ignorant never reacts to opponents’ changes of (...)
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  11.  2
    Signaling Probabilities in Ambiguity: Who Reacts to Vague News?Dmitri Vinogradov & Yousef Makhlouf - 2021 - Theory and Decision 90 (3-4):371-404.
    Ambiguity affects decisions of people who exhibit a distaste of and require a premium for dealing with it. Do ambiguity-neutral subjects completely disregard ambiguity and react to any vague news? Online vending platforms often attempt to affect buyer’s decisions by messages like “20 people are looking at this item right now” or “The average score based on 567 reviews is 7.9/10”. We augment the two-color Ellsberg experiment with similarly worded signals about the unknown probability of success. All decision-makers, including ambiguity-neutral, (...)
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  12.  3
    Participation in Risk Sharing Under Ambiguity.Jan Werner - 2021 - Theory and Decision 90 (3-4):507-519.
    This paper is about participation in efficient risk sharing among agents who have ambiguous beliefs about uncertain states of nature. The question we ask is whether and how can ambiguous beliefs give rise to some agents not participating in efficient risk sharing. Ambiguity of beliefs is described by the multiple-prior expected utility of Gilboa and Schmeidler, or the variational preferences of Maccheroni et al. :1447–1498, 2006). The main result says that if the aggregate risk is relatively small, then the agents (...)
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  13.  5
    On the Aversion to Incomplete Preferences.Ritxar Arlegi, Sacha Bourgeois-Gironde & Mikel Hualde - 2021 - Theory and Decision 90 (2):183-217.
    We propose an axiomatization of aversion to incomplete preferences. Some prevailing models of incomplete preferences rely on the hypothesis that incompleteness is temporary and that by keeping their opportunity set open individuals reveal a preference for flexibility. We consider that the maintenance of incomplete preference is also aversive. Our model allows us to show how incompleteness induces an aversive attitude in two different ways: intrinsic and instrumental. Intrinsic aversion holds when one instance of incomplete preference in the set suffices to (...)
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  14.  1
    Signal Extraction: Experimental Evidence.Te Bao & John Duffy - 2021 - Theory and Decision 90 (2):219-232.
    We report on an experiment examining whether individuals can solve a simple signal extraction problem of the type found in models with imperfect information. In one treatment, subjects must form point predictions based on observing both public and private signals, while in another they receive the same information but must decide on the weight to attach to each signal, which then determines their point prediction. We find that, at the aggregate level, signal extraction provides a good characterization of subjects’ behavior (...)
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  15.  4
    Preference for Flexibility and Dynamic Consistency with Incomplete Preferences.Fernanda Senra de Moura & Gil Riella - 2021 - Theory and Decision 90 (2):171-181.
    We generalize a previous result about dynamically consistent menu preferences to the case where preferences are not necessarily complete. We show that, as it is the case when preferences are complete, a subjective state space version of dynamic consistency is linked to a comparative theory of preference for flexibility. In words, an objective signal is interpreted as an event in the agent’s subjective state space and the agent acts in a dynamically consistent way after that if and only if we (...)
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  16.  2
    Learning and Dropout in Contests: An Experimental Approach.Francesco Fallucchi, Jan Niederreiter & Massimo Riccaboni - 2021 - Theory and Decision 90 (2):245-278.
    We design an experiment to study investment behavior in different repeated contest settings, varying the uncertainty of the outcomes and the number of participants in contests. We find decreasing over-expenditures and a higher rate of ‘dropout’ in contests with high uncertainty over outcomes, while we detect a quick convergence toward equilibrium predictions and a near to full participation when this type of uncertainty vanishes. These results are robust to changes in the number of contestants. A learning parameter estimation using the (...)
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  17.  2
    A Strategic Justification of the Constrained Equal Awards Rule Through a Procedurally Fair Multilateral Bargaining Game.Makoto Hagiwara & Shunsuke Hanato - 2021 - Theory and Decision 90 (2):233-243.
    We propose a new game to strategically justify the constrained equal awards rule in claims problems. Our game is “procedurally fair” and “multilateral”. In addition, even if claimants cannot reach an agreement in any period, they can renegotiate in the next period. We show that, for each claims problem, the awards vector chosen by the constrained equal awards rule achieved at period 1 is the unique subgame perfect equilibrium outcome of the game.
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  18.  5
    What to Tell? Wise Communication and Wise Crowd.Chen Li & Ning Liu - 2021 - Theory and Decision 90 (2):279-299.
    This paper investigates how communication influences people’s judgment quality in simple estimation tasks. Except for an exchange of estimates, our design also allows the exchange of supportive evidence underlying the estimates in a controlled manner. Compared with the control treatment, the exchange of estimates and supportive evidence together improves judgment quality at both the individual level and the crowd level. On the other hand, the exchange of estimates or supportive evidence separately has no impact.
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  19.  6
    Philippe Mongin.Jean Baccelli & Marcus Pivato - 2021 - Theory and Decision 90 (1):1-9.
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  20.  6
    A Theory of Instrumental and Existential Rational Decisions: Smith, Weber, Mauss, Tönnies After Martin Buber.Elias L. Khalil & Alain Marciano - 2021 - Theory and Decision 90 (1):147-169.
    This paper proffers a dialogical theory of decision-making: decision-makers are engaged in two modes of rational decisions, instrumental and existential. Instrumental rational decisions take place when the DM views the self externally to the objects, whether goods or animate beings. Existential rational decisions take place when the DM views the self in union with such objects. While the dialogical theory differs from Max Weber’s distinction between two kinds of rationality, it follows Martin Buber’s philosophical anthropology. The paper expounds the ramifications (...)
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  21.  4
    Good Decision Vs. Good Results: Outcome Bias in the Evaluation of Financial Agents.Christian König-Kersting, Monique Pollmann, Jan Potters & Stefan T. Trautmann - 2021 - Theory and Decision 90 (1):31-61.
    We document outcome bias in situations where an agent makes risky financial decisions for a principal. In three experiments, we show that the principal’s evaluations and financial rewards for the agent are strongly affected by the random outcome of the risky investment. This happens despite her exact knowledge of the investment strategy, which can, therefore, be assessed independently of the outcome. The principal thus judges the same decision by the agent differently, depending on factors that the agent has no influence (...)
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  22.  3
    Welfare Implications of Non-Unitary Time Discounting.Ryoji Ohdoi & Koichi Futagami - 2021 - Theory and Decision 90 (1):85-115.
    This study proposes a model of non-unitary time discounting and examines its welfare implications. A key feature of our model lies in the disparity of time discounting between multiple distinct goods, which induces an individual’s preference reversals even though she normally discounts her future utilities for each good. After characterizing the time-consistent decision-making by such an individual, we compare welfare achieved in the market economy and welfare in the planner’s allocation from the perspective of all selves across time. Under certain (...)
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  23.  2
    Rank-Dominant Strategy and Sincere Voting.Yasunori Okumura - 2021 - Theory and Decision 90 (1):117-145.
    This study considers a voting rule wherein each player sincerely votes when he/she has no information about the preferences of the other players. We introduce the concept of rank-dominant strategies to discuss the situation where a player is completely ignorant in the preferences of the other players and decision theoretic justification of the concept. We show that under the plurality voting rule with the equal probability random tie-breaking, sincere voting is always the rank-dominant strategy of each voter. We also discuss (...)
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  24.  3
    Set and Revealed Preference Axioms for Multi-Valued Choice.Hans Peters & Panos Protopapas - 2021 - Theory and Decision 90 (1):11-29.
    We consider choice correspondences that assign a subset to every choice set of alternatives, where the total set of alternatives is an arbitrary finite or infinite set. We focus on the relations between several extensions of the condition of independence of irrelevant alternatives on one hand, and conditions on the revealed preference relation on sets, notably the weak axiom of revealed preference, on the other hand. We also establish the connection between the condition of independence of irrelevant alternatives and so-called (...)
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  25.  2
    A Unified Epistemological Theory of Information Processing.Áron Tóbiás - 2021 - Theory and Decision 90 (1):63-83.
    What does it mean for an agent faced with choice under uncertainty to “know” something? While a variety of mathematical methods are available to construct formal models to answer this question, the combination of different approaches may lead to unsettling paradoxes. I propose a unified theory that eliminates such inconsistencies by relying on a sharp conceptual distinction between information the decision-maker observes and how much of that information she can cognitively process. The resulting model allows for natural decision-theoretic characterizations of (...)
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