Lexicographic Multiple Prior Preferences (original) (raw)

2019

Abstract

This paper introduces and axiomatizes lexicographic multiple prior preferences. Our model generalizes lexicographic subjective expected utility (LSEU) (see, e.g. Blume et al. (1991a)) by allowing for uncertainty (i.e. multiple priors) in each step of the ordered chain of beliefs. This extends the applicability of lexicographic choice procedures to settings with payoff uncertainty. We give two such applications. The first is a signaling model, where the uncertainty is about the payoff types of players. The second is a problem of insurance under uncertainty, where the uncertainty is about endowments.

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