The paper investigates a decision-making process involving both risk and ambiguity. Differently from existing papers [Basili, M., Chateauneuf, A., Fontini, F., 2005. Choices under ambiguity with familiar and unfamiliar outcomes, Theory and Decision 58, 195–207; Chichilnisky, G., 2000. Axiomatic approach to choice under uncertainty with catastrophic risks. Resources and Energy Economics 22, 221–231; Chichilnisky, G., 2002. In: El-Shaarawi, A.,H., Piegorsch, W.W. (Eds.), Catastropic Risks. Encyclopedia of Environmetrics, vol. 1.John Wiley & Sons, Ltd, Chichester, UK, pp. 274–279], we assume that, in a Choquet Expected Utility framework, the decision-maker is pessimistic with respect to unfamiliar (catastrophic) losses, optimistic with respect to unfamiliar (windfall) gains and ambiguity-neutral with respect to the familiar world. A representation of the decision-maker's choice is obtained that mimics the Restricted Bayes– Hurwicz Criterion. In this way a characterization of the Precautionary Principle is introduced for decision-making processes under ambiguity with catastrophic losses and/or windfall gains.

Basili, M., A., C., & F., F. (2008). Precautionary principle as a rule of choice with optimism on windfall gains and pessimism on catastrophic losses. ECOLOGICAL ECONOMICS, 67, 485-491.

Precautionary principle as a rule of choice with optimism on windfall gains and pessimism on catastrophic losses

BASILI, MARCELLO;
2008

Abstract

The paper investigates a decision-making process involving both risk and ambiguity. Differently from existing papers [Basili, M., Chateauneuf, A., Fontini, F., 2005. Choices under ambiguity with familiar and unfamiliar outcomes, Theory and Decision 58, 195–207; Chichilnisky, G., 2000. Axiomatic approach to choice under uncertainty with catastrophic risks. Resources and Energy Economics 22, 221–231; Chichilnisky, G., 2002. In: El-Shaarawi, A.,H., Piegorsch, W.W. (Eds.), Catastropic Risks. Encyclopedia of Environmetrics, vol. 1.John Wiley & Sons, Ltd, Chichester, UK, pp. 274–279], we assume that, in a Choquet Expected Utility framework, the decision-maker is pessimistic with respect to unfamiliar (catastrophic) losses, optimistic with respect to unfamiliar (windfall) gains and ambiguity-neutral with respect to the familiar world. A representation of the decision-maker's choice is obtained that mimics the Restricted Bayes– Hurwicz Criterion. In this way a characterization of the Precautionary Principle is introduced for decision-making processes under ambiguity with catastrophic losses and/or windfall gains.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11365/7710
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