Bayes without Bernoulli: Simple Conditions for Probabilistically Sophisticated Choice
AbstractIn 1963, Anscombe and Aumann demonstrated that the introduction of an objective randomizing device into the Savage setting of subjective uncertainty considerably simplified the derivation of subjective probability from a decision maker's preferences over uncertain bets. The purpose of this paper is to present a more general derivation of classical subjective probability in such a framework, which neither assumes nor implies that the individual's risk preferences necessarily conform to the expected utility principle. We argue that the essence of "Bayesian rationality" is the assignment, correct manipulation, and proper updating of subjective event probablities when evaluating and comparing uncertain prospects, regardless of whether attitudes toward risk satisfy the expected utility property.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 67 (1995)
Issue (Month): 1 (October)
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Web page: http://www.elsevier.com/locate/inca/622869
Other versions of this item:
- Mark J. Machina & David Schmeidler, 1994. "Bayes Without Bernoulli: Simple Conditions for Probabilistically Sophisticated Choice," Discussion Papers 1088, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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.:
- Machina, Mark J & Schmeidler, David, 1992.
"A More Robust Definition of Subjective Probability,"
Econometric Society, vol. 60(4), pages 745-80, July.
- Machina,Mark & Schmeidler,David, 1991. "A more robust definition of subjective probability," Discussion Paper Serie A 365, University of Bonn, Germany.
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- David Schmeidler, 1989.
"Subjective Probability and Expected Utility without Additivity,"
Levine's Working Paper Archive
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245, California Institute of Technology, Division of the Humanities and Social Sciences.
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