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Framing Contingencies
Author(s) -
Ahn David S.,
Ergin Haluk
Publication year - 2010
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta7019
Subject(s) - partition (number theory) , decision maker , subjective expected utility , contingency , mathematical economics , mathematics , expected utility hypothesis , contingency table , state space , computer science , combinatorics , statistics , operations research , linguistics , philosophy
The subjective likelihood of a contingency often depends on the manner in which it is described to the decision maker. To accommodate this dependence, we introduce a model of decision making under uncertainty that takes as primitive a family of preferences indexed by partitions of the state space. Each partition corresponds to a description of the state space. We characterize the following partition‐dependent expected utility representation. The decision maker has a nonadditive set function ν over events. Given a partition of the state space, she computes expected utility with respect to her partition‐dependent belief, which weights each cell in the partition by ν . Nonadditivity of ν allows the probability of an event to depend on the way in which the state space is described. We propose behavioral definitions for those events that are transparent to the decision maker and those that are completely overlooked, and connect these definitions to conditions on the representation.