Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72651
Authors: 
Adam, Klaus
Year of Publication: 
2003
Series/Report no.: 
CFS Working Paper 2003/02
Abstract: 
This paper compares Bayesian decision theory with robust decision theory where the decision maker optimizes with respect to the worst state realization. For a class of robust decision problems there exists a sequence of Bayesian decision problems whose solution converges towards the robust solution. It is shown that the limiting Bayesian problem displays infinite risk aversion and that decisions are insensitive (robust) to the precise assignment of prior probabilities. This holds independent from whether the preference for robustness is global or restricted to local perturbations around some reference model.
Subjects: 
robust decision theory
uncertainty aversion
risk aversion
JEL: 
D81
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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