Abstract.
A theory of choice under uncertainty is proposed which removes the completeness assumption from the Anscombe–Aumann formulation of Savage's theory and introduces an inertia assumption. The inertia assumption is that there is such a thing as the status quo and an alternative is accepted only if it is preferred to the status quo. This theory is one way of giving rigorous expression to Frank Knight's distinction between risk and uncertainty.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Author information
Authors and Affiliations
Additional information
Received: 8 October 2001 / Accepted: 8 November 2001
The author is grateful to Martin Shubik for encouragement and long discussions. He is also grateful to Donald Brown, Edward Leamer, David Schmeidler, Martin Shubik, Sidney Winter, Asad Zaman and Arnold Zellner for calling his attention to relevant literature.
Note of the Editor: Except for a few minor editorial changes, this article publishes content formerly circulated as Discussion Paper no.~807 of the Cowles Foundation at Yale University, November 1986.
Rights and permissions
About this article
Cite this article
Bewley, T. Knightian decision theory. Part I. DEF 25, 79–110 (2002). https://doi.org/10.1007/s102030200006
Issue Date:
DOI: https://doi.org/10.1007/s102030200006