What were you thinking? Decision theory as coherence test

Itzhak Gilboa, Larry Samuelson

Research output: Contribution to journalArticlepeer-review

Abstract

Decision theory can be used to test the logic of decision making—one may ask whether a given set of decisions can be justified by a decision-theoretic model. Indeed, in principal–agent settings, such justifications may be required—a manager of an investment fund may be asked what beliefs she used when valuing assets and a government may be asked whether a portfolio of rules and regulations is coherent. In this paper we ask which collections of uncertain-act evaluations can be simultaneously justified under the maxmin expected utility criterion by a single set of probabilities. We draw connections to the fundamental theorem of finance (for the special case of a Bayesian agent) and revealed-preference results.

Original languageEnglish
Pages (from-to)507-519
Number of pages13
JournalTheoretical Economics
Volume17
Issue number2
DOIs
StatePublished - May 2022

Keywords

  • D8
  • Decision theory
  • coherence
  • maxmin expected utility
  • revealed preference

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