Probabilistic Sophistication and Stochastic Monotonicity in the Savage Framework
AbstractMachina & Schmeidler (1992) 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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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1621.
Length: 15 pages
Date of creation: Aug 2007
Date of revision:
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
Other versions of this item:
- Grant, Simon & Özsoy, Hatice & Polak, Ben, 2008. "Probabilistic sophistication and stochastic monotonicity in the Savage framework," Mathematical Social Sciences, Elsevier, vol. 55(3), pages 371-380, May.
- Simon Grant & Hatice Ozsoy & Ben Polak, 2007. "Probabilistic Sophistication and Stochastic Monotonicity in the Savage Framework," Levine's Bibliography 122247000000001390, UCLA Department of Economics.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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- Machina,Mark & Schmeidler,David, 1991.
"A more robust definition of subjective probability,"
Discussion Paper Serie A
365, University of Bonn, Germany.
- Machina, Mark J & Schmeidler, David, 1992. "A More Robust Definition of Subjective Probability," Econometrica, Econometric Society, vol. 60(4), pages 745-80, July.
- Mark J. Machina & David Schmeidler, 1990. "A More Robust Definition of Subjective Probability," Discussion Paper Serie A 306, University of Bonn, Germany.
- 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.
- Sarin, Rakesh & Wakker, Peter P., 2000. "Cumulative dominance and probabilistic sophistication," Mathematical Social Sciences, Elsevier, vol. 40(2), pages 191-196, September.
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