Ambiguity and the Bayesian Approach


Advances in Economics and Econometrics: Theory and Applications

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Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

An analytic calculus for the intuitionistic logic of proofs


Notre Dame Journal of Formal Logic

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Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Confidence in belief and rational decision making


Economics and Philosophy

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Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : Confidence, Decision Under Uncertainty, Belief, Rationality

The standard, Bayesian account of rational belief and decision is often argued to be unable to cope properly with severe uncertainty, of the sort ubiquitous in some areas of policy making. This paper tackles the question of what should replace it as a guide for rational decision making. It defends a recent proposal, which reserves a role for the decision maker’s confidence in beliefs. Beyond being able to cope with severe uncertainty, the account has strong normative credentials on the main fronts typically evoked as relevant for rational belief and decision. It fares particularly well, we argue, in comparison to other prominent non-Bayesian models in the literature

Explore first, exploite next: the true shape of regret in bandit problems


Mathematics of Operations Research

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Départements : Economie et Sciences de la décision

We revisit lower bounds on the regret in the case of multi-armed bandit problems. We obtain non-asymptotic, distribution-dependent bounds and provide straightforward proofs based only on well-known properties of Kullback-Leibler divergences. These bounds show in particular that in an initial phase the regret grows almost linearly, and that the well-known logarithmic growth of the regret only holds in a final phase. The proof techniques come to the essence of the information-theoretic arguments used and they are deprived of all unnecessary complications

Forward Guidance and Heterogenous Beliefs


American Economic Journal: Macroeconomics

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Départements : Economie et Sciences de la décision

Perception‐Theoretic Foundations of Weighted Utilitarianism


Economic Journal

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Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

We provide a microfoundation for a weighted utilitarian social welfare function that reflects common moral intuitions about interpersonal comparisons of utilities. If utility is only ordinal in the usual microeconomic sense, interpersonal comparisons are meaningless. Nonetheless, economics often adopts utilitarian welfare functions, assuming that comparable utility functions can be calibrated using information beyond consumer choice data. We show that consumer choice data alone are sufficient. As suggested by Edgeworth (1881), just noticeable differences provide a common unit of measure for interpersonal comparisons of utility differences. We prove that a simple monotonicity axiom implies a weighted utilitarian aggregation of preferences, with weights proportional to individual jnd's. This article is protected by copyright. All rights reserved

Why the Empty Shells Were Not Fired: A Semi-Bibliographical Note



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Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Belief-free price formation


Journal of Financial Economics

février 2018, vol. 127, n°2, pp.342-365

Départements : Finance, GREGHEC (CNRS), Economie et Sciences de la décision

Mots clés : Financial market microstructure, Informed dealers, Price volatility, Belief-free equilibria

We analyze security price formation in a dynamic setting in which long-lived dealers re- peatedly compete for the opportunity to trade with short-lived retail traders. We charac- terize equilibria in which dealers’ pricing strategies are optimal irrespective of the private information that each dealer may possess. Thus, our model’s predictions are robust to dif- ferent specifications of the dealers’ information structure. These equilibria reconcile, in a unified and parsimonious framework, price dynamics that are reminiscent of well-known stylized facts: excess price volatility, price to trading flow correlation, stochastic volatility and inventory-related trading

Combining probability with qualitative degree-of-certainty metrics in assessment


Climatic Change

aout 2018, vol. 149, n°3-4, pp.517-525

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Reports of the Intergovernmental Panel on Climate Change (IPCC) employ an evolving framework of calibrated language for assessing and communicating degrees of certainty in findings. A persistent challenge for this framework has been ambiguity in the relationship between multiple degree-of-certainty metrics. We aim to clarify the relationship between the likelihood and confidence metrics used in the Fifth Assessment Report (2013), with benefits for mathematical consistency among multiple findings and for usability in downstream modeling and decision analysis. We discuss how our proposal meshes with current and proposed practice in IPCC uncertainty assessment

Deciding about human lives: an experimental measure of risk attitudes under prospect theory


Social Choice and Welfare

juin 2018, vol. 51, n°1, pp.163-192

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

For public policies in the health, security or safety domains, the main consequences concern the number of human lives that are saved or lost, and are uncertain ex-ante. In classic economic evaluations of such policies, losses and gains of human lives are often monetized and aggregated with other costs and benefits. Uncertainty about human lives is thus treated as uncertainty about monetary consequences. In this paper, we question whether people risk human lives as they risk money.We present an experiment comparing risk attitudes towards human lives and towards money under prospect theory. The results show that respondents treat the two attributes differently when losses are involved. Specifically, the decisions involving human lives are characterizedby less elevated probability weighting in the loss domain and higher loss aversion compared to decisions involving money. These findings suggest that public preferences may differ from the cost-benefit analysis recommendations