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Subjective expected utility theory without states of the world

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  • Karni, Edi

Abstract

This paper develops an axiomatic theory of decision making under uncertainty that dispenses with the state space. The results are subjective expected utility models with unique, action-dependent, subjective probabilities, and a utility function defined over wealth-effect pairs that is unique up to positive linear transformation.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 42 (2006)
Issue (Month): 3 (June)
Pages: 325-342

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Handle: RePEc:eee:mateco:v:42:y:2006:i:3:p:325-342

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

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References

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  1. Itzhak Gilboa & David Schmeidler, 2004. "Subjective Distributions," Theory and Decision, Springer, Springer, vol. 56(4), pages 345-357, 01.
  2. Gilboa,Itzhak & Schmeidler,David, 2001. "A Theory of Case-Based Decisions," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521003117.
  3. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 418, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Wakker, Peter, 1987. "Subjective probabilities for state dependent continuous utility," Mathematical Social Sciences, Elsevier, Elsevier, vol. 14(3), pages 289-298, December.
  5. Karni, Edi, 1996. "Probabilities and Beliefs," Journal of Risk and Uncertainty, Springer, Springer, vol. 13(3), pages 249-62, November.
  6. Edi Karni, 2005. "Foundations of Bayesian Theory," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 524, The Johns Hopkins University,Department of Economics.
  7. Karni Edi, 1993. "Subjective Expected Utility Theory with State-Dependent Preferences," Journal of Economic Theory, Elsevier, Elsevier, vol. 60(2), pages 428-438, August.
  8. Luce, R Duncan & Krantz, David H, 1971. "Conditional Expected Utility," Econometrica, Econometric Society, Econometric Society, vol. 39(2), pages 253-71, March.
  9. James A. Mirrlees, 1976. "The Optimal Structure of Incentives and Authority Within an Organization," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 7(1), pages 105-131, Spring.
  10. Itzhak Gilboa, 1993. "Hempel, Good and Bayes," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1045, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521622448.
  12. Costis Skiadas, 1997. "Conditioning and Aggregation of Preferences," Econometrica, Econometric Society, Econometric Society, vol. 65(2), pages 347-368, March.
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Citations

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Cited by:
  1. Edi Karni, 2009. "A theory of medical decision making under uncertainty," Journal of Risk and Uncertainty, Springer, Springer, vol. 39(1), pages 1-16, August.
  2. Grant, Simon & Quiggin, John, 2006. "Learning and Discovery," Risk and Sustainable Management Group Working Papers, University of Queensland, School of Economics 151174, University of Queensland, School of Economics.
  3. Edi Karni, 2007. "Bayesian Decision Theory and the Representation of Beliefs," Levine's Bibliography 321307000000000776, UCLA Department of Economics.
  4. Edi Karni, 2009. "A Theory of Bayesian Decision Making," EIEF Working Papers Series, Einaudi Institute for Economics and Finance (EIEF) 0904, Einaudi Institute for Economics and Finance (EIEF), revised May 2009.
  5. Edi Karni, 2009. "A Theory of Bayesian Decision Making," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 550, The Johns Hopkins University,Department of Economics.
  6. Vassili Vergopoulos, 2011. "Dynamic consistency for non-expected utility preferences," Economic Theory, Springer, Springer, vol. 48(2), pages 493-518, October.
  7. Edi Karni, 2008. "Agency theory: choice-based foundations of the parametrized distribution formulation," Economic Theory, Springer, Springer, vol. 36(3), pages 337-351, September.
  8. Edi Karni, 2005. "A New Approach to Modeling Decision-Making under Uncertainty and Defining Subjective Probabilities," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 519, The Johns Hopkins University,Department of Economics.
  9. Edi Karni, 2011. "A theory of Bayesian decision making with action-dependent subjective probabilities," Economic Theory, Springer, Springer, vol. 48(1), pages 125-146, September.
  10. Karni, Edi, 2009. "A reformulation of the maxmin expected utility model with application to agency theory," Journal of Mathematical Economics, Elsevier, Elsevier, vol. 45(1-2), pages 97-112, January.
  11. Svetlana Boyarchenko & Sergei Levendorskii, 2005. "Discount factors ex post and ex ante, and discounted utility anomalies," Microeconomics, EconWPA 0510013, EconWPA, revised 17 Nov 2005.

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