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A Theory of Vague Expected Utility

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Author Info
Paola Manzini (Queen Mary, University of London and IZA)
Marco Mariotti (Queen Mary, University of London)

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Abstract

We propose a new theory of choice between lotteries, which combines an 'economic’ view of decision making - based on a rational, though incomplete, ordering - with a 'psychological’ view - based on heuristics. This theory can explain observed violations of EU theory, namely all cyclical patterns of choice as well as violations of independence.

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File URL: http://129.3.20.41/eps/game/papers/0304/0304003.pdf
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Publisher Info
Paper provided by EconWPA in its series Game Theory and Information with number 0304003.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 27 pages
Date of creation: 17 Apr 2003
Date of revision: 16 Jul 2004
Handle: RePEc:wpa:wuwpga:0304003

Note: Type of Document - pdf; prepared on IBM PC - PC-TEX; to print on HP; pages: 27; figures: included
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Web page: http://129.3.20.41

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Related research
Keywords: incomplete preference relation; cyclical preferences; expected utility;

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Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Mandler, Michael, 2005. "Incomplete preferences and rational intransitivity of choice," Games and Economic Behavior, Elsevier, vol. 50(2), pages 255-277, February. [Downloadable!] (restricted)
  2. Kunreuther, Howard & Novemsky, Nathan & Kahneman, Daniel, 2001. " Making Low Probabilities Useful," Journal of Risk and Uncertainty, Springer, vol. 23(2), pages 103-20, September. [Downloadable!] (restricted)
  3. Rubinstein, Ariel, 1988. "Similarity and decision-making under risk (is there a utility theory resolution to the Allais paradox?)," Journal of Economic Theory, Elsevier, vol. 46(1), pages 145-153, October. [Downloadable!] (restricted)
  4. Juan Dubra & Efe A. Ok, 2002. "A Model of Procedural Decision Making in the Presence of Risk," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1053-1080, November. [Downloadable!] (restricted)
  5. Juan Dubra & Fabio Maacheroni & Efe A. Ok, 2001. "Expected Utility Theory without the Completeness Axiom," Cowles Foundation Discussion Papers 1294, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  6. Paola Manzini & Marco Mariotti, 2008. "On the Representation of Incomplete Preferences Over Risky Alternatives," Theory and Decision, Springer, vol. 65(4), pages 303-323, December. [Downloadable!] (restricted)
  7. Amartya Sen, 1997. "Maximization and the Act of Choice," Econometrica, Econometric Society, vol. 65(4), pages 745-780, July.
    Other versions:
  8. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June. [Downloadable!] (restricted)
  9. Eliaz, Kfir & Ok, Efe A., 2006. "Indifference or indecisiveness? Choice-theoretic foundations of incomplete preferences," Games and Economic Behavior, Elsevier, vol. 56(1), pages 61-86, July. [Downloadable!] (restricted)
  10. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-24, December. [Downloadable!] (restricted)
  11. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pierre-Yves Geoffard & Stéphane Luchini, 2007. "Changing time and emotions," PSE Working Papers 2007-32, PSE (Ecole normale supérieure). [Downloadable!]
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