A Theory of Rational Choice under Ignorance
 Klaus Nehring
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Abstract
This paper contributes to a theory of rational choice for decisionmakers with incomplete preferences due to partial ignorance, whose beliefs are representable as sets of acceptable priors. We focus on the limiting case of `Complete Ignorance' which can be viewed as reduced form of the general case of partial ignorance. Rationality is conceptualized in terms of a `Principle of PreferenceBasedness', according to which rational choice should be isomorphic to asserted preference. The main result characterizes axiomatically a new choicerule called `Simultaneous Expected Utility Maximization'. It can be interpreted as agreement in a bargaining game (KalaiSmorodinsky solution) whose players correspond to the (extremal) `acceptable priors' among which the decision maker has suspended judgment. An essential but nonstandard feature of Simultaneous Expected Utility choices is their dependence on the entire choice set. This is justified by the conception of optimality as compromise rather than as superiority in pairwise comparisons.
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 Title
 A Theory of Rational Choice under Ignorance
 Journal

Theory and Decision
Volume 48, Issue 3 , pp 205240
 Cover Date
 20000501
 DOI
 10.1023/A:1005298715864
 Print ISSN
 00405833
 Online ISSN
 15737187
 Publisher
 Kluwer Academic Publishers
 Additional Links
 Topics
 Keywords

 Ignorance
 Ambiguity
 Multiple priors
 Rational choice
 Incomplete preference
 Robustness
 Independence
 Surething principle
 Contextdependence
 Choice consistency
 Industry Sectors
 Authors

 Klaus Nehring ^{(1)}
 Author Affiliations

 1. Department of Economics, University of California, Davis, CA, 95616, USA