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Probabilistic sophistication and stochastic monotonicity in the Savage framework

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Author Info
Grant, Simon
Özsoy, Hatice
Polak, Ben

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Abstract

Machina and Schmeidler [Machina, M., Schmeidler, D., 1992. A more robust definition of subjective probability. Econometrica 60, 745-780] show that probabilistic sophistication can be obtained in a Savage setting without imposing expected utility by dropping Savage's axiom P2 (sure-thing principle) and strengthening his axiom P4 (weak comparative probability). Their stronger axiom, however, embodies a degree of separability analogous to P2. In this note, we obtain probabilistic sophistication using Savage's original axiom P4 and a weaker analog of Savage's P2.

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Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 55 (2008)
Issue (Month): 3 (May)
Pages: 371-380
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Handle: RePEc:eee:matsoc:v:55:y:2008:i:3:p:371-380

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Web page: http://www.elsevier.com/locate/inca/505565

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  1. Machina, Mark J & Schmeidler, David, 1992. "A More Robust Definition of Subjective Probability," Econometrica, Econometric Society, vol. 60(4), pages 745-80, July. [Downloadable!] (restricted)
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  2. Sarin, Rakesh & Wakker, Peter P., 2000. "Cumulative dominance and probabilistic sophistication," Mathematical Social Sciences, Elsevier, vol. 40(2), pages 191-196, September. [Downloadable!] (restricted)
  3. Grant, Simon & Polak, Ben, 2006. "Bayesian beliefs with stochastic monotonicity: An extension of Machina and Schmeidler," Journal of Economic Theory, Elsevier, vol. 130(1), pages 264-282, September. [Downloadable!] (restricted)
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