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Probabilities and Beliefs

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  • Karni, Edi

Abstract

Choice-theoretic definitions of subjective probabilities originated with the work of Ramsey and de Finetti and attained their definitive form in the work of Savage. These probabilities are intended to provide a numerical representation of a decision maker's beliefs regarding the likely realization of alternative events. In this article, I argue that the choice-theoretic definitions of subjective probabilities involve a tacit convention--namely, state-independent utility functions--that is not implied by the axioms, and, as a consequence, choice-theoretic subjective probabilities, even when they exist, do not necessarily represent the decision makers' beliefs. Copyright 1996 by Kluwer Academic Publishers

Suggested Citation

  • Karni, Edi, 1996. "Probabilities and Beliefs," Journal of Risk and Uncertainty, Springer, vol. 13(3), pages 249-262, November.
  • Handle: RePEc:kap:jrisku:v:13:y:1996:i:3:p:249-62
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    Cited by:

    1. Simon Grant & Edi Karni, 2005. "Why Does It Matter That Beliefs And Valuations Be Correctly Represented?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 917-934, August.
    2. Brian Hill, 2009. "Living without state-independence of utilities," Theory and Decision, Springer, vol. 67(4), pages 405-432, October.
    3. Enrico Diecidue & Peter Wakker & Marcel Zeelenberg, 2007. "Eliciting decision weights by adapting de Finetti’s betting-odds method to prospect theory," Journal of Risk and Uncertainty, Springer, vol. 34(3), pages 179-199, June.
    4. Philippe Mongin, 2011. "La théorie de la décision et la psychologie du sens commun," Working Papers hal-00625445, HAL.
    5. Hill, Brian, 2010. "An additively separable representation in the Savage framework," Journal of Economic Theory, Elsevier, vol. 145(5), pages 2044-2054, September.
    6. Edi Karni, 2008. "Agency theory: choice-based foundations of the parametrized distribution formulation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(3), pages 337-351, September.
    7. Vorobyev, Oleg, 2009. "Eventology versus contemporary theories of uncertainty," MPRA Paper 13961, University Library of Munich, Germany.
    8. Karni, Edi, 2006. "Subjective expected utility theory without states of the world," Journal of Mathematical Economics, Elsevier, vol. 42(3), pages 325-342, June.
    9. Edi Karni, 2007. "Bayesian Decision Theory and the Representation of Beliefs," Discussion Paper Series dp444, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    10. Karni, Edi, 2007. "Foundations of Bayesian theory," Journal of Economic Theory, Elsevier, vol. 132(1), pages 167-188, January.
    11. Edi Karni, 2009. "A Theory of Bayesian Decision Making," EIEF Working Papers Series 0904, Einaudi Institute for Economics and Finance (EIEF), revised May 2009.
    12. Klaus Nehring, 2006. "Bernoulli Without Bayes: A Theory of Utility-Sophisticated Preferences under Ambiguity," Economics Working Papers 0072, Institute for Advanced Study, School of Social Science.
    13. repec:dau:papers:123456789/1051 is not listed on IDEAS
    14. Nehring, Klaus, 2009. "Imprecise probabilistic beliefs as a context for decision-making under ambiguity," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1054-1091, May.
    15. Klaus Nehring, 2006. "Decision-Making in the Context of Imprecise Probabilistic Beliefs," Economics Working Papers 0034, Institute for Advanced Study, School of Social Science.
    16. Grant, Simon & Karni, Edi, 2004. "A theory of quantifiable beliefs," Journal of Mathematical Economics, Elsevier, vol. 40(5), pages 515-546, August.

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