Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Mar, 2010, Volume 78, Issue 2

Framing Contingencies
p. 655-695

David S. Ahn, Haluk Ergin

The subjective likelihood of a contingency often depends on the manner in which it is described to the decision maker. To accommodate this dependence, we introduce a model of decision making under uncertainty that takes as primitive a family of preferences indexed by partitions of the state space. Each partition corresponds to a description of the state space. We characterize the following representation. The decision maker has a nonadditive set function over events. Given a partition of the state space, she computes expected utility with respect to her partition‐dependent belief, which weights each cell in the partition by . Nonadditivity of allows the probability of an event to depend on the way in which the state space is described. We propose behavioral definitions for those events that are transparent to the decision maker and those that are completely overlooked, and connect these definitions to conditions on the representation.

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Supplement to "Framing Contingencies"

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