Certainty Independence and the Separation of Utility and Beliefs
AbstractEconomists often operate under an implicit assumption that the tastes of a decision maker are constant, while his beliefs change with the availability of new information. It is therefore customary to seek representations of preferences which cleanly separate the taste component, called âutility,â from the beliefs component. We show that a complete separation of utility from the other components of the representation is possible only if the decision makerâs preferences satisfy a mild but not completely innocuous condition, called âcertainty independence.â We prove that the preferences that obtain such separation are a subset of the biseparable preferences.nonatomic probability measures, we extend some of these results to the case of individuals with decreasing marginal evaluations.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 120 (2005)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/inca/622869
Other versions of this item:
- Paolo Ghirardato & Fabio Maccheroni & Massimo Marinacci, 2002. "Certainty Independence and the Separation of Utility and Beliefs," ICER Working Papers - Applied Mathematics Series 40-2002, ICER - International Centre for Economic Research.
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.:
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- Ghirardato, Paolo & Marinacci, Massimo, 2000. "Risk, Ambigity and the Separation of Utility and Beliefs," Working Papers 1085, California Institute of Technology, Division of the Humanities and Social Sciences.
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- Paolo Ghirardato & Massimo Marinacci, 2000. "Risk, Ambiguity, and the Separation of Utility and Beliefs," Levine's Working Paper Archive 7616, David K. Levine.
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