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The certainty effect and neo-continuous subjective sources in Hurwicz expected utility

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  • Grant, Simon

Abstract

Gul and Pesendorfer (2015) introduce subjective sources in Hurwicz expected utility: event domains on which binary bets are ranked as if by a prior and this “as if” behavior varies continuously with the event. Motivated by the certainty effect, I relax continuity only at the extremes, allowing discontinuities at impossible and certain events while maintaining continuity for non-degenerate bets. I characterize these non-extreme-outcome (neo)-continuous sources by a conditional power-series link between source probability and inner probability on an ideal core event. On acts measurable with respect to a neo-continuous source, the Hurwicz functional admits a rank-dependent representation on non-extreme ranks together with an extreme-outcome term.

Suggested Citation

  • Grant, Simon, 2026. "The certainty effect and neo-continuous subjective sources in Hurwicz expected utility," Journal of Mathematical Economics, Elsevier, vol. 125(C).
    • Handle: RePEc:eee:mateco:v:125:y:2026:i:c:s0304406826000455
    DOI: 10.1016/j.jmateco.2026.103257
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