A Bayesian hierarchical model of Ellsberg-type preferences
Preprint
Abstract
We consider a Bayesian hierarchical model of Ellsberg-type preferences based on conditional subjective expected utility. In our model, optimism and pessimism emanate from motivated prior beliefs about unobserved outcomes. This implies that optimism and pessimism can only propagate along the structure of the hierarchical model when the probability of outcomes is unknown (ambiguity) rather than known (risk). We show that the prevailing preferences observed in Ellsberg (1961)'s two-urn experiment and Jabarian and Lazarus (2023)'s two-ball experiment are reproduced by our model when motivated priors are pessimistic.Keywords
All Related Versions
This publication has 26 references indexed in Scilit:
- Subjective beliefs and ambiguity aversionEconomics Letters, 2022
- A factor graph approach to automated design of Bayesian signal processing algorithmsInternational Journal of Approximate Reasoning, 2019
- Decision Theory with a Human Face2017
- Active inference and epistemic valueCognitive Neuroscience, 2015
- Short article: Is luck on my side? Optimism, pessimism, and ambiguity aversionQuarterly Journal of Experimental Psychology, 2009
- Differentiating ambiguity and ambiguity attitudeJournal of Economic Theory, 2004
- Ambiguity seeking in multi‐attribute decisions: Effects of optimism and message framingJournal of Behavioral Decision Making, 1994
- Recent developments in modeling preferences: Uncertainty and ambiguityJournal of Risk and Uncertainty, 1992
- Maxmin expected utility with non-unique priorJournal of Mathematical Economics, 1989
- A Simultaneous Axiomatization of Utility and Subjective ProbabilityPhilosophy of Science, 1967