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Preference for equivalent random variables: A price for unbounded utilities

Author

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  • Seidenfeld, Teddy
  • Schervish, Mark J.
  • Kadane, Joseph B.

Abstract

Savage's expected utility theory orders acts by the expectation of the utility function for outcomes over states. Therefore, preference between acts depends only on the utilities for outcomes and the probability distribution of states. When acts have more than finitely many possible outcomes, then utility is bounded in Savage's theory. This paper explores consequences of allowing preferences over acts with unbounded utility. Under certain regularity assumptions about indifference, and in order to respect (uniform) strict dominance between acts, there will be a strict preference between some pairs of acts that have the same distribution of outcomes. Consequently in these cases, preference is not a function of utility and probability alone.

Suggested Citation

  • Seidenfeld, Teddy & Schervish, Mark J. & Kadane, Joseph B., 2009. "Preference for equivalent random variables: A price for unbounded utilities," Journal of Mathematical Economics, Elsevier, vol. 45(5-6), pages 329-340, May.
    • Handle: RePEc:eee:mateco:v:45:y:2009:i:5-6:p:329-340
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    Cited by:

    1. Mark Schervish & Teddy Seidenfeld & Joseph Kadane, 2014. "On the equivalence of conglomerability and disintegrability for unbounded random variables," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 23(4), pages 501-518, November.
    2. Marcus Pivato, 2014. "Additive representation of separable preferences over infinite products," Theory and Decision, Springer, vol. 77(1), pages 31-83, June.
    3. Russell, Jeffrey Sanford, 2020. "Non-Archimedean preferences over countable lotteries," Journal of Mathematical Economics, Elsevier, vol. 88(C), pages 180-186.
    4. Mark J. Schervish & Teddy Seidenfeld & Joseph B. Kadane, 2014. "On the equivalence of conglomerability and disintegrability for unbounded random variables," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 23(4), pages 501-518, November.

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