Year: 2017
Type: article
Abstract: We present a decision-theoretic analysis of an agent's understanding of the interdependencies in her choices. We provide the foundations for a simple and flexible model that allows the misperception of correlated risks. We introduce a framework in which the decision maker chooses a portfolio of assets among which she may misperceive the joint returns, and present simple axioms equivalent to a representation in which she attaches a probability to each possible joint distribution over returns and then maximizes subjective expected utility using her ( possibly misspecified) beliefs. (JEL D11, D81, D83, G11)
Source: American Economic Review
DOI: 10.1257/aer.20160093
Authors: Andrew Ellis, Michele Piccione
Institution: London School of Economics and Political Science
Language: English
Subfield: General Decision Sciences
Field: Decision Sciences
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2551629330