The Multiple Priors of the Open-Minded Decision Maker

23 Pages Posted: 19 Mar 2020

See all articles by Martin Dumav

Martin Dumav

Universidad Carlos III

Maxwell Stinchcombe

University of Texas at Austin

Date Written: February 24, 2020

Abstract

A multiple-prior decision maker is open-minded if she can describe, as subjective uncertainty, all convex sets of distributions over payoff relevant consequences. Theorem 1: open-mindedness is equivalent to the ability to subjectively describe both the uniform distribution on an interval and the set of all distributions on an interval. Theorem 2: sets of priors that fail either condition cannot describe a dense class of problems. The use of open-minded sets of priors to model decision makers allows the objective and the subjective approaches to uncertainty to inform each other. It also changes the implications of previously used axioms for multi-prior preferences because the axioms must apply to a larger set of problems.

Keywords: Ambiguity, decision theory, multiple priors, open-mindedness

JEL Classification: D11, D81

Suggested Citation

Dumav, Martin and Stinchcombe, Maxwell, The Multiple Priors of the Open-Minded Decision Maker (February 24, 2020). Available at SSRN: https://ssrn.com/abstract=3543440 or http://dx.doi.org/10.2139/ssrn.3543440

Martin Dumav (Contact Author)

Universidad Carlos III ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Maxwell Stinchcombe

University of Texas at Austin ( email )

2317 Speedway
Austin, TX Texas 78712
United States

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