Academic Journal
Source Theory: A Tractable and Positive Ambiguity Theory
| Title: | Source Theory: A Tractable and Positive Ambiguity Theory |
|---|---|
| Authors: | Aurélien Baillon, Han Bleichrodt, Chen Li, Peter P. Wakker |
| Contributors: | Universidad de Alicante. Departamento de Fundamentos del Análisis Económico, Microeconomía Aplicada (GIMA), business school, emlyon, EMLyon Business School (EM), Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne (GATE Lyon Saint-Étienne), Université Lumière - Lyon 2 (UL2)-Université Jean Monnet - Saint-Étienne (UJM)-EMLyon Business School (EM)-Centre National de la Recherche Scientifique (CNRS), Universidad de Alicante, Erasmus University Rotterdam |
| Source: | RUA. Repositorio Institucional de la Universidad de Alicante Universidad de Alicante (UA) |
| Publisher Information: | Institute for Operations Research and the Management Sciences (INFORMS), 2025. |
| Publication Year: | 2025 |
| Subject Terms: | ambiguity aversion, Subjective beliefs, Ambiguity aversion, [SHS.GESTION]Humanities and Social Sciences/Business administration, subjective beliefs, Ellsberg paradox, [SHS.ECO]Humanities and Social Sciences/Economics and Finance, [SHS.ECO] Humanities and Social Sciences/Economics and Finance, [SHS.GESTION] Humanities and Social Sciences/Business administration, Source of uncertainty, source of uncertainty |
| Description: | This paper introduces source theory, a new theory for decision under ambiguity (unknown probabilities). It shows how Savage’s subjective probabilities, with source-dependent nonlinear weighting functions, can model Ellsberg’s ambiguity. It can do so in Savage’s framework of state-contingent assets, permits nonexpected utility for risk, and avoids multistage complications. It is tractable, shows ambiguity attitudes through simple graphs, is empirically realistic, and can be used prescriptively. We provide a new tool to analyze weighting functions: pmatchers. They give Arrow–Pratt-like transformations but operate “within” rather than “outside” functions. We further show that ambiguity perception and inverse S probability weighting, seemingly unrelated concepts, are two sides of the same “insensitivity” coin. This paper was accepted by Manel Baucells, behavioral economics and decision analysis. Funding: H. Bleichrodt acknowledges financial support from the Spanish Ministry of Science, Innovation and Universities [Project PID2022-142356NB-I00 financed by Grant MICIU/AEI/10.13039/501100011033 and by FEDER] and from the Consellería de Innovación Universidades, Ciencia y Sociedad Digital de la Generalitat Valenciana [Grant Prometeo/2021/073]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2023.03307 . |
| Document Type: | Article |
| File Description: | application/pdf |
| Language: | English |
| ISSN: | 1526-5501 0025-1909 |
| DOI: | 10.1287/mnsc.2023.03307 |
| Access URL: | http://hdl.handle.net/10045/152192 https://pure.eur.nl/en/publications/2a7d75f4-98cb-4401-b25e-7ede00185220 https://doi.org/10.1287/mnsc.2023.03307 https://hal.science/hal-04964898v1/document https://hal.science/hal-04964898v1 https://doi.org/10.1287/mnsc.2023.03307 |
| Rights: | CC BY NC ND |
| Accession Number: | edsair.doi.dedup.....becdd3a5b9abdccd95ab0d82085fbdee |
| Database: | OpenAIRE |
| ISSN: | 15265501 00251909 |
|---|---|
| DOI: | 10.1287/mnsc.2023.03307 |