MAxmin expected utility with non-unique prior

Abstract

One of the first objections to Savage’s paradigm was raised by Ellsberg (1961). He suggested the following mind experiment, challenging the expected utility hypotheses: subject is asked to preference rank four bets. He/she is shown two urns, each containing 100 balls each one either red or black. Urn A contains 50 black balls and 50 red ones, while there is no additional information about urn B. One ball is drawn at random from each urn. Bet 1 is “the ball drawn from urn A is black,” and will be denoted by AB. Bet 2 is “the ball drawn from urn A is red,” and will be denoted by AR, and similarly we have BB and BR. Winning a bet entitles the subject $100. The following preferences have been observed empirically: AB & AR > BB & BR. It is easy to see that there is no probability measure supporting these preferences through expected utility maximization.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 33 citations exist upstream.