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Red herrings: Some thoughts on the meaning of zero-probability events and mathematical modeling

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  • Karni, Edi

Abstract

Kicking off the discussion following Savage's presentation at the 1952 Paris colloquium, Arrow raised what he considered to be a difficulty with the intuitive interpretation of Savage's theorem. It suggests that decision makers strictly prefer betting on an event of measure zero over betting on a proper subset of that event. Within the realm of the revealed-preference methodology and limited verifiability, Arrow's difficulty is a red herring: the problem he poses has its origin in the technical aspects of Savage's model and not in its substantive aspect.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 107 (2010)
Issue (Month): 2 (May)
Pages: 134-135

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Handle: RePEc:eee:ecolet:v:107:y:2010:i:2:p:134-135

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: Zero-probability events Null events Revealed preference;

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  1. Blume, Lawrence & Brandenburger, Adam & Dekel, Eddie, 1991. "Lexicographic Probabilities and Choice under Uncertainty," Econometrica, Econometric Society, vol. 59(1), pages 61-79, January.
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