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A Simple Tool for Qualitatively Testing, Quantitatively Measuring, and Normatively Justifying Savage's Subjective Expected Utility

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  • Veronika K–bberling
  • Peter P. Wakker

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Abstract

This paper introduces a new preference condition that can be used to justify (or criticize) expected utility. The approach taken in this paper is an alternative to Savage's, and is accessible to readers without a mathematical background. It is based on a method for deriving "comparisons of tradeoffs" from ordinal preferences. Our condition simplifies previously-published tradeoff conditions, and at the same time provides more general and more powerful tools to specialists. The condition is more closely related to empirical methods for measuring utility than its predecessors. It provides a unifying tool for qualitatively testing, quantitatively measuring, and normatively justifying expected utility.

Suggested Citation

  • Veronika K–bberling & Peter P. Wakker, 2004. "A Simple Tool for Qualitatively Testing, Quantitatively Measuring, and Normatively Justifying Savage's Subjective Expected Utility," Journal of Risk and Uncertainty, Springer, vol. 28(2), pages 135-145, March.
  • Handle: RePEc:kap:jrisku:v:28:y:2004:i:2:p:135-145
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    Cited by:

    1. Katarzyna Werner & Horst Zank, 2012. "Foundations for Prospect Theory Through Probability Midpoint Consistency," The School of Economics Discussion Paper Series 1210, Economics, The University of Manchester.
    2. David H. Krantz & Howard C. Kunreuther, 2007. "Goals and plans in decision making," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 2, pages 137-168, June.
    3. Peter Brooks & Horst Zank, 2005. "Loss Averse Behavior," Journal of Risk and Uncertainty, Springer, vol. 31(3), pages 301-325, December.
    4. repec:eee:jetheo:v:172:y:2017:i:c:p:88-119 is not listed on IDEAS
    5. Alexander Harin, 2005. "A new approach to solve old problems," Game Theory and Information 0505005, EconWPA.

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