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Conditioning and Aggregation of Preferences

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  • Costis Skiadas
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    Abstract

    This paper develops a general framework for modeling choice under uncertainty that extends subjective expected utility to include nonseparabilities, state-dependence, and the effect of subjective or ill defined consequences. This is accomplished by not including consequences among the formal primitives. Instead, the effect of consequences is modeled indirectly, through conditional preferences over acts. The main results concern the aggregation of conditional utilities to form an unconditional utility, including the case of additive aggregation. Applications, obtained by further specifying the structure of acts and conditional preferences, include disappointment, regret, and the subjective value of information.

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    Bibliographic Info

    Article provided by Econometric Society in its journal Econometrica.

    Volume (Year): 65 (1997)
    Issue (Month): 2 (March)
    Pages: 347-368

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    Handle: RePEc:ecm:emetrp:v:65:y:1997:i:2:p:347-368

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    Cited by:
    1. Jurgen Eichberger & Simon Grant & David Kelsey, 2006. "Updating Choquet Beliefs," Discussion Papers 0607, Exeter University, Department of Economics.
    2. Karni, Edi, 2007. "Foundations of Bayesian theory," Journal of Economic Theory, Elsevier, vol. 132(1), pages 167-188, January.
    3. Grant, Simon & Kajii, Atsushi & Polak, Ben, 2000. "Decomposable Choice under Uncertainty," Journal of Economic Theory, Elsevier, vol. 92(2), pages 169-197, June.
    4. Manel Baucells & Lloyd S. Shapley, 2000. "Multiperson Utility," Econometric Society World Congress 2000 Contributed Papers 0078, Econometric Society.
    5. Edi Karni, 2005. "Subjective Expected Utility Theory without States of the World," Economics Working Paper Archive 523, The Johns Hopkins University,Department of Economics.
    6. Thibault Gajdos & Feriel Kandil, 2008. "The ignorant observer," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00177374, HAL.
    7. Grant, Simon & Kajii, Atsushi & Polak, Ben, 2001. "Different notions of disappointment aversion," Economics Letters, Elsevier, vol. 70(2), pages 203-208, February.
    8. Simon Grant & Atsushi Kajii & Ben Polak, 1998. "On the Skiadas 'Conditional Preference Approach' to Choice Under Uncertainty," Cowles Foundation Discussion Papers 1178, Cowles Foundation for Research in Economics, Yale University.
    9. Carlos Laciana & Elke Weber, 2008. "Correcting expected utility for comparisons between alternative outcomes: A unified parameterization of regret and disappointment," Journal of Risk and Uncertainty, Springer, vol. 36(1), pages 1-17, February.
    10. Thibault Gajdos & Feriel Kandil, 2008. "The ignorant observer," Post-Print halshs-00177374, HAL.
    11. Kraus, Alan & Sagi, Jacob S., 2006. "Asset pricing with unforeseen contingencies," Journal of Financial Economics, Elsevier, vol. 82(2), pages 417-453, November.
    12. Skiadas, Costis, 1997. "Subjective Probability under Additive Aggregation of Conditional Preferences," Journal of Economic Theory, Elsevier, vol. 76(2), pages 242-271, October.
    13. Peter Klibanoff & Emre Ozdenoren, 2007. "Subjective recursive expected utility," Economic Theory, Springer, vol. 30(1), pages 49-87, January.
    14. Duffie, Darrell, 2003. "Intertemporal asset pricing theory," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 11, pages 639-742 Elsevier.
    15. Edi Karni, 2007. "Bayesian Decision Theory and the Representation of Beliefs," Discussion Paper Series dp444, The Center for the Study of Rationality, Hebrew University, Jerusalem.

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