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.:
- David Schmeidler, 1989.
"Subjective Probability and Expected Utility without Additivity,"
Levine's Working Paper Archive
7662, David K. Levine.
- Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May.
- Massimo Marinacci & Paolo Ghirardato, 2001.
"Risk, ambiguity, and the separation of utility and beliefs,"
ICER Working Papers - Applied Mathematics Series
21-2001, ICER - International Centre for Economic Research.
- Paolo Ghirardato & Massimo Marinacci, 2000. "Risk, Ambiguity, and the Separation of Utility and Beliefs," Levine's Working Paper Archive 7616, David K. Levine.
- Paolo Ghirardato & Massimo Marinacci, 2000. "Risk, Ambiguity and the Separation of Utility and Beliefs," Econometric Society World Congress 2000 Contributed Papers 1143, Econometric Society.
- 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.
- Epstein, Larry G, 1999. "A Definition of Uncertainty Aversion," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 579-608, July.
- F J Anscombe & R J Aumann, 2000. "A Definition of Subjective Probability," Levine's Working Paper Archive 7591, David K. Levine.
- Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
- Ghirardato, Paolo & Maccheroni, Fabio & Marinacci, Massimo & Siniscalchi, Marciano, 2001.
"A Subjective Spin on Roulette Wheels,"
1127, California Institute of Technology, Division of the Humanities and Social Sciences.
- Ghirardato, Paolo & Marinacci, Massimo, 2002. "Ambiguity Made Precise: A Comparative Foundation," Journal of Economic Theory, Elsevier, vol. 102(2), pages 251-289, February.
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