Savage's Axioms Usually Imply Violation of Strict Stochastic Dominance
AbstractL. J. Savage's axioms do not imply strict stochastic dominance. Instead, they usually involve violation of that. Violations occur as soon as the range of the utility function is rich enough, e.g., contains an interval, and the probability measure is, loosely speaking, constructive. An example is given where all of Savage's axioms are satisfied but still strict statewise monotonicity is violated: An agent is willing to exchange an act for another act that with certainty yields a strictly worse outcome. Thus, book can be made against the agent. Stochastic dominance and statewise monotonicity are always satisfied when restricted to acts with finitely many outcomes. Copyright 1993 by The Review of Economic Studies Limited.
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Volume (Year): 60 (1993)
Issue (Month): 2 (April)
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