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Benchmarking real-valued acts

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Author Info

  • Erio Castagnoli

    (Bocconii University, Milan, Italy)

  • Marco LiCalzi

    (University of Venice, Italy)

Abstract

A benchmarking procedure ranks real-valued acts by the probability that they outperform a benchmark B; that is, an act f is evaluated by means of the functional V(f) = P(f > B). Expected utility is a special case of benchmarking procedure, where the acts and the benchmark are stochastically independent. This paper provides axiomatic characterizations of preference relations that are representable as benchmarking procedures. The key axiom is the sure-thing principle. When the state space is infinite, different continuity assumptions translate into different properties of the probability P.

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File URL: http://128.118.178.162/eps/mic/papers/0502/0502001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Microeconomics with number 0502001.

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Length: 22 pages
Date of creation: 02 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpmi:0502001

Note: Type of Document - pdf; pages: 22
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Web page: http://128.118.178.162

Related research

Keywords: sure-thing principle; state-dependent expected utility; measure representation approach; target-based reasoning;

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References

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  1. Segal, Uzi, 1993. " The Measure Representation: A Correction," Journal of Risk and Uncertainty, Springer, vol. 6(1), pages 99-107, January.
  2. Robert Bordley & Marco LiCalzi, 2000. "Decision analysis using targets instead of utility functions," Decisions in Economics and Finance, Springer, vol. 23(1), pages 53-74.
  3. LiCalzi, Marco, 1998. "Variations on the measure representation approach," Journal of Mathematical Economics, Elsevier, vol. 29(3), pages 255-269, April.
  4. Gerard Debreu, 1959. "Topological Methods in Cardinal Utility Theory," Cowles Foundation Discussion Papers 76, Cowles Foundation for Research in Economics, Yale University.
  5. Hong, Chew Soo & Wakker, Peter, 1996. "The Comonotonic Sure-Thing Principle," Journal of Risk and Uncertainty, Springer, vol. 12(1), pages 5-27, January.
  6. Erio Castagnoli & Marco LiCalzi, 2005. "Expected utility without utility," Game Theory and Information 0508004, EconWPA.
  7. Chateauneuf, Alain, 1999. "Comonotonicity axioms and rank-dependent expected utility theory for arbitrary consequences," Journal of Mathematical Economics, Elsevier, vol. 32(1), pages 21-45, August.
  8. Wakker, Peter, 1993. " Counterexamples to Segal's Measure Representation Theorem," Journal of Risk and Uncertainty, Springer, vol. 6(1), pages 91-98, January.
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Cited by:
  1. Brian, HILL, 2007. "An additively separable representation in the Savage framework," Les Cahiers de Recherche 882, HEC Paris.
  2. Enrico G. De Giorgi & David B. Brown & Melvyn Sim, 2010. "Dual representation of choice and aspirational preferences," University of St. Gallen Department of Economics working paper series 2010 2010-07, Department of Economics, University of St. Gallen.

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