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"Making Book against Oneself," the Independence Axiom, and Nonlinear Utility Theory

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  • Green, Jerry

Abstract

An individual with known preferences over lotteries can be led to accept random wealth distributions different from his initi al endowment by a sequential process in which some uncertainty is res olved and he is offered a new lottery in place of the remaining uncer tainty. This paper examines the restrictions that can be placed on an individual's preferences by axioms that stipulate that such a proces s not be able to generate a new wealth distribution that is prima fac ie inferior to the original. The relationship of these axioms to the independence axiom of von Neumann and Morgenstern and to the quasicon vexity of preferences in the wealth distribution are explored. Copyright 1987, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 102 (1987)
Issue (Month): 4 (November)
Pages: 785-96

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Handle: RePEc:tpr:qjecon:v:102:y:1987:i:4:p:785-96

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  1. Machina, Mark J., 1984. "Temporal risk and the nature of induced preferences," Journal of Economic Theory, Elsevier, vol. 33(2), pages 199-231, August.
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Cited by:
  1. Juergen Eichberger & David Kelsey & Burkhard C. Schipper, 2003. "Ambiguity and Social Interaction," Bonn Econ Discussion Papers bgse23_2003, University of Bonn, Germany.
  2. Oscar Volij, 2002. "A Remark on Bargaining and Non-Expected Utility," Economic theory and game theory 016, Oscar Volij.
  3. Border, K.C. & Segal, U., 1997. "Coherent Odds and Subjective Probability," UWO Department of Economics Working Papers 9717, University of Western Ontario, Department of Economics.
  4. Grant, S & Kajii, A & Polak, B, 1997. "Intrinsic Preference for Information," Papers 323, Australian National University - Department of Economics.
  5. Ludwig, Alexander & Zimper, Alexander, 2004. "Investment Behavior under Ambiguity: The Case of Pessimistic Decision Makers," Sonderforschungsbereich 504 Publications 04-31, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  6. David Laibson & Leeat Yariv, 2007. "Safety in Markets: An Impossibility Theorem for Dutch Books," Levine's Bibliography 122247000000001746, UCLA Department of Economics.

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