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A Simple Tool for Qualitatively Testing, Quantitatively Measuring, and Normatively Justifying Savage's Subjective Expected Utility

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  • Veronika K–bberling
  • Peter P. Wakker

Abstract

This paper introduces a new preference condition that can be used to justify (or criticize) expected utility. The approach taken in this paper is an alternative to Savage's, and is accessible to readers without a mathematical background. It is based on a method for deriving "comparisons of tradeoffs" from ordinal preferences. Our condition simplifies previously-published tradeoff conditions, and at the same time provides more general and more powerful tools to specialists. The condition is more closely related to empirical methods for measuring utility than its predecessors. It provides a unifying tool for qualitatively testing, quantitatively measuring, and normatively justifying expected utility.

Suggested Citation

  • Veronika K–bberling & Peter P. Wakker, 2004. "A Simple Tool for Qualitatively Testing, Quantitatively Measuring, and Normatively Justifying Savage's Subjective Expected Utility," Journal of Risk and Uncertainty, Springer, vol. 28(2), pages 135-145, March.
    • Handle: RePEc:kap:jrisku:v:28:y:2004:i:2:p:135-145
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    Citations

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    Cited by:

    1. Shiri Alon, 2014. "Derivation of a Cardinal Utility Through a Weak Trade-off Consistency Requirement," Mathematics of Operations Research, INFORMS, vol. 39(2), pages 290-300, May.
    2. L'Haridon, Olivier, 2009. "Behavior in the loss domain: An experiment using the probability trade-off consistency condition," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 540-551, August.
    3. Denis Bouyssou & Thierry Marchant, 2011. "Subjective expected utility without preferences," Working Papers hal-00606939, HAL.
    4. Katarzyna Werner & Horst Zank, 2012. "Foundations for Prospect Theory Through Probability Midpoint Consistency," Economics Discussion Paper Series 1210, Economics, The University of Manchester.
    5. David H. Krantz & Howard C. Kunreuther, 2007. "Goals and plans in decision making," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 2, pages 137-168, June.
    6. repec:cup:judgdm:v:2:y:2007:i::p:137-168 is not listed on IDEAS
    7. Peter Brooks & Horst Zank, 2005. "Loss Averse Behavior," Journal of Risk and Uncertainty, Springer, vol. 31(3), pages 301-325, December.
    8. Diecidue, Enrico & Somasundaram, Jeeva, 2017. "Regret theory: A new foundation," Journal of Economic Theory, Elsevier, vol. 172(C), pages 88-119.
    9. Alexander Harin, 2005. "A new approach to solve old problems," Game Theory and Information 0505005, University Library of Munich, Germany.
    10. Fang Liu, 2021. "Regret theory under fear of the unknown," Papers 2108.01825, arXiv.org.

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