States, models and unitary equivalence I: Representation theorems and analogical reasoning
 Title:
 States, models and unitary equivalence I: Representation theorems and analogical reasoning
 Author(s):
 Amarante, Massimiliano
 Date:
 2004
 Type:
 Working papers
 Department(s):
 Economics
 Persistent URL:
 http://hdl.handle.net/10022/AC:P:470
 Series:
 Department of Economics Discussion Papers
 Part Number:
 040510
 Publisher:
 Department of Economics, Columbia University
 Publisher Location:
 New York
 Abstract:
 I show that virtually any model of decision making under uncertainty is associated to a certain structure. This contains three fundamental ingredients: (1) The domain of the acts; (2) Another set, which is called the set of models for the decision maker; and (3) The decision maker's information about the set of models (an algebra of subsets of the set of models). A consequence of this finding is that that the decision maker's choices can be viewed as the outcome of a twostage process. First, the set of acts is mapped into a system of hypothetical bets on the set of models. Then, the latter are ranked by the decision maker. I show that this procedure can be thought of as describing a general form of analogical reasoning. I also observe that the appearance of two different sets implies that the decision maker is uncertain about two different objects and that he may receive information about any of them. In particular, information about the set of models affects the decision maker's ranking of the available alternatives. In the sequel to this paper, I show that certain natural information structures lead to an inherent inability of assigning probabilities on the domain of the acts. In a formal sense, their properties describe the idea of Knightian Uncertainty.
 Subject(s):
 Economic theory
 Item views
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 Suggested Citation:
 Massimiliano Amarante, 2004, States, models and unitary equivalence I: Representation theorems and analogical reasoning, Columbia University Academic Commons, http://hdl.handle.net/10022/AC:P:470.