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A Model of Procedural Decision Making in the Presence of Risk

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  • Juan Dubra

    (New York University, Universidad de Montevideo)

  • Efe A. Ok

    (New York University)

Abstract

We introduce a procedural model of risky choice in which an individual is endowed with a core preference relation that may be highly incomplete. She can, however, derive further rankings of alternatives from her core preferences by means of a procedure based on the independence axiom. We find that the preferences that are generated from an initial set of rankings according to this procedure can be represented by means of a "set" of von Neumann-Morgenstern utility functions, thereby allowing for incompleteness of preference relations. The proposed theory also yields new characterizations of the stochastic dominance orderings. Copyright 2002 by the Economics Department of the University of Pennsylvania and Osaka University Institute of Social and Economic Research Association

Suggested Citation

  • 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.
    • Handle: RePEc:ier:iecrev:v:43:y:2002:i:4:p:1053-1080
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    Cited by:

    1. Simone Cerreia-Vioglio & Alfio Giarlotta & Salvatore Greco & Fabio Maccheroni & Massimo Marinacci, 2020. "Rational preference and rationalizable choice," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(1), pages 61-105, February.
    2. Eric Danan & Thibault Gajdos & Jean-Marc Tallon, 2015. "Harsanyi's Aggregation Theorem with Incomplete Preferences," American Economic Journal: Microeconomics, American Economic Association, vol. 7(1), pages 61-69, February.
    3. Eric Danan & Thibault Gajdos & Jean-Marc Tallon, 2023. "Tailored recommendations," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 60(1), pages 15-34, January.
    4. Forrest Jeffrey Yi-Lin & Tiglioglu Tufan & Liu Yong & Mong Donald & Cardin Marta, 2023. "Various Convexities and Some Relevant Properties of Consumer Preference Relations," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 33(4), pages 145-168, December.
    5. Kraus, Alan & Sagi, Jacob S., 2006. "Inter-temporal preference for flexibility and risky choice," Journal of Mathematical Economics, Elsevier, vol. 42(6), pages 698-709, September.
    6. Dubra, Juan & Maccheroni, Fabio & Ok, Efe A., 2004. "Expected utility theory without the completeness axiom," Journal of Economic Theory, Elsevier, vol. 115(1), pages 118-133, March.
    7. 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.
    8. Eric Danan, 2010. "Randomization vs. Selection: How to Choose in the Absence of Preference?," Management Science, INFORMS, vol. 56(3), pages 503-518, March.
    9. Mamoru Kaneko, 2020. "Expected utility theory with probability grids and preference formation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 70(3), pages 723-764, October.
    10. Karni, Edi & Safra, Zvi, 2015. "Continuity, completeness, betweenness and cone-monotonicity," Mathematical Social Sciences, Elsevier, vol. 74(C), pages 68-72.
    11. Alon, Shiri & Bavly, Gilad & Gayer, Gabrielle, 2022. "Inductive inference with incompleteness," Games and Economic Behavior, Elsevier, vol. 132(C), pages 576-591.
    12. Drapeau, Samuel & Jamneshan, Asgar, 2016. "Conditional preference orders and their numerical representations," Journal of Mathematical Economics, Elsevier, vol. 63(C), pages 106-118.
    13. Dubra Juan & Echenique Federico, 2001. "Monotone Preferences over Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-18, December.
    14. Simone Cerreia-Vioglio & Alfio Giarlotta & Salvatore Greco & Fabio Maccheroni & Massimo Marinacci, 2020. "Rational preference and rationalizable choice," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(1), pages 61-105, February.
    15. Mamoru Kaneko, 2019. "Expected Utility Theory with Probability Grids and Preference Formation," Working Papers 1902, Waseda University, Faculty of Political Science and Economics.

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