Economic Theory

, Volume 64, Issue 1, pp 121–137 | Cite as

Purely subjective variational preferences

Research Article

Abstract

Variational preferences (Maccheroni et al. in Econometrica 74:1447–1498, 2006) are an important class of ambiguity averse preferences, compatible with Ellsberg-type phenomena. In this paper, a new foundation for variational preferences is derived in a framework of two stages of purely subjective uncertainty. A similar foundation is obtained for purely subjective maxmin expected utility (Gilboa and Schmeidler in J Math Econ 18:141–153, 1989). By establishing their axiomatic foundations without the use of extraneous probabilities, the conceptual appeal and applicability of these ambiguity models is enhanced.

Keywords

Variational preferences Ambiguity aversion Subjective uncertainty 

JEL Classification

D81 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  1. 1.Economics, School of Social SciencesThe University of ManchesterManchesterUK

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