22 Pages Posted: 14 May 2009 Last revised: 10 Aug 2009
Date Written: June 19, 2009
Justifiability is a name for a variety of well-documented behavioral phenomena that violate rational choices. For instance, preferences and choices frequently depend on payoff-irrelevant factors, and not only on the collection of alternatives. Motivated by these findings we present a generalized ambiguity model that involves a collection of multiple priors. We characterize Knightian (Bewley (2002)) preferences that accommodate justifiability. An act f is (weakly) preferred to act g if, according to at least one set of multiple priors (which is derived by a payoff-irrelevant factor) in the collection, f is unanimously preferred to g. These kind of preferences are called "justifiable preferences". In addition, a particular model of justifiable preferences that are generated by partially-specified probabilities is axiomatized.
Keywords: Justifiable preferences, multiple priors, multiple multiple priors, partially specified probabilities
JEL Classification: D81, D83
Suggested Citation: Suggested Citation