Economic Theory

, Volume 53, Issue 2, pp 335–356 | Cite as

Bayesian decision theory with action-dependent probabilities and risk attitudes

Research Article

Abstract

This paper extends the work of Karni (Econ Theory 48:125–146, 2011) to allow for the possibility that decision makers’ effect-dependent risk attitudes are also affected by their actions. This extension is essential for modeling decision situations in which actions have a monetary dimension that creates interaction between actions and wealth.

Keywords

Bayesian decision theory Subjective probabilities Prior distributions Beliefs Constant utility bets 

JEL Classification

D80 D81 D82 

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Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  1. 1.Department of EconomicsJohns Hopkins UniversityBaltimoreUSA

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