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Random Expected Utility

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Author Info
Faruk Gul
Wolfgang Pesendorfer

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Abstract

We develop and analyze a model of random choice and random expected utility. A decision problem is a finite set of lotteries that describe the feasible choices. A random choice rule associates with each decision problem a probability measure over choices. A random utility function is a probability measure over von Neumann-Morgenstern utility functions. We show that a random choice rule maximizes some random utility function if and only if it is mixture continuous, monotone (the probability that a lottery is chosen does not increase when other lotteries are added to the decision problem), extreme (lotteries that are not extreme points of the decision problem are chosen with probability 0), and linear (satisfies the independence axiom). Copyright The Econometric Society 2006.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2006.00651.x
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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 74 (2006)
Issue (Month): 1 (01)
Pages: 121-146
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Handle: RePEc:ecm:emetrp:v:74:y:2006:i:1:p:121-146

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Stephen A. Clark, 1995. "The random utility model with an infinite choice space," Economic Theory, Springer, vol. 7(1), pages 179-189.
  2. Fishburn, Peter C., 1992. "Induced binary probabilities and the linear ordering polytope: a status report," Mathematical Social Sciences, Elsevier, vol. 23(1), pages 67-80, February. [Downloadable!] (restricted)
  3. Faruk Gul & Wolfgang Pesendorfer, 2006. "Random Expected Utility," Econometrica, Econometric Society, vol. 74(1), pages 121-146, 01. [Downloadable!] (restricted)
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  4. Barbera, Salvador & Pattanaik, Prasanta K, 1986. "Falmagne and the Rationalizability of Stochastic Choices in Terms of Random Orderings," Econometrica, Econometric Society, vol. 54(3), pages 707-15, May. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Faruk Gul & Wolfgang Pesendorfer, 2005. "Random Expected Utility," Levine's Bibliography 122247000000000834, UCLA Department of Economics. [Downloadable!]
    Other versions:
  2. Wilcox, Nathaniel, 2007. "Stochastically more risk averse: A contextual theory of stochastic discrete choice under risk," MPRA Paper 11851, University Library of Munich, Germany. [Downloadable!]
  3. Halevy, Yoram, 2005. "Ellsberg Revisited: an Experimental Study," Micro Theory Working Papers halevy-05-07-26-11-51-13, Microeconomics.ca Website, revised 07 Jun 2008. [Downloadable!]
    Other versions:
  4. Glenn W Harrison, 2008. "Neuroeconomics: A Critical Reconsideration," Levine's Working Paper Archive 122247000000001915, David K. Levine. [Downloadable!]
  5. B. Douglas Bernheim & Antonio Rangel, 2008. "Beyond Revealed Preference: Choice Theoretic Foundations for Behavioral Welfare Economics," NBER Working Papers 13737, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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