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S ubjective expected utility theory does not distinguish between attitudes toward uncertainty (ambiguous probabilities) and attitudes toward risk (unambiguous probabilities). Both are explained in terms of nonlinear utility for money rather than properties of events per se, hence, the decision maker displays the same attitude toward all sources of risk and(More)
S coring rules can provide incentives for truthful reporting of probabilities and evaluation measures for the probabilities after the events of interest are observed. Often the space of events is ordered and an evaluation relative to some baseline distribution is desired. Scoring rules typically studied in the literature and used in practice do not take(More)
Information measures arise in many disciplines, including forecasting (where scoring rules are used to provide incentives for probability estimation), signal processing (where information gain is measured in physical units of relative entropy), decision analysis (where new information can lead to improved decisions), and finance (where investors optimize(More)
T he Pratt-Arrow measure of local risk aversion is generalized for the n-dimensional state-preference model of choice under uncertainty in which the decision maker may have inseparable subjective probabilities and utilities, unobservable stochastic prior wealth, and/or smooth nonexpected-utility preferences. Local risk aversion is measured by the matrix of(More)
Suppose that a risk-averse expected utility maximizer with a precise probability distribution p bets optimally against a risk neutral opponent (or equivalently invests in an incomplete market for contingent claims) whose beliefs (or prices) are described by a convex set Q of probability distributions. This utility-maximization problem is the dual of the(More)
In this paper we model the problem faced by a risk-averse decision maker with a precise subjective probability distribution who bets against a risk-neutral opponent or invests in a financial market where the beliefs of the opponent or the representative agent in the market are described by a convex set of imprecise probabilities. The problem of finding the(More)
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