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Essays on decision theory

Grant number: 17/09955-4
Support type:Scholarships in Brazil - Doctorate (Direct)
Effective date (Start): August 01, 2017
Effective date (End): February 29, 2020
Field of knowledge:Applied Social Sciences - Economics
Principal Investigator:José Heleno Faro
Grantee:Ana Carolina Tereza Ramos de Oliveira dos Santos
Home Institution: Instituto de Ensino e Pesquisa (Insper). São Paulo , SP, Brazil
Associated scholarship(s):18/00215-0 - Essays on decision theory, BE.EP.DD

Abstract

A relevant issue in economics is to understand how individuals make their decisions in situations of uncertainty, more specifically how they update their choices with the arrival of new information. This problem is called updating and the theory developed to explain it allows such models to be applied in different contexts such as: asset pricing, finance and game theory. This project aims to propose a updating rule in a model in which the decision maker is characterized by a pair of binary relations sensitive to ambiguity, that is, to the uncertainty that potentially can not be represented according to the Bayesian paradigm. The first ex-ante relationship is incomplete and satisfies a set of behavior conditions that is consistent with the variational Bewley preferences representation. The second preference relation must satisfy weak conditions including completeness and, together, relations must satisfy two axioms that relate to the interconnection between them. Thus, the conjecture that motivates this project consists in characterizing the udpating rule and the class of preferences to which the second conditional relation belongs, given a relevant event (that is, the one that the agent learns as being that which contains the real state of nature). The methodology to be used is the axiomatic and the analysis of the results will be made through the comparison of the main theorem and its unfolding with the literature. In addition to answering this question, the present project will contemplate the development of two more theoretical articles in the field of decision theory. (AU)