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On the decision under uncertainty in economic theory

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  • Aldo Montesano

    (Bocconi University)

Abstract

Two approaches to introducing agents’ preferences under uncertainty are indicated. The approach followed by the general theory, from Pareto’s Manual onward, places preferences on possible choices among the “data” of the theory. Therefore, the representation of uncertainty’s influence on preferences is unnecessary. Even in the absence of this representation, it is possible to obtain from the preferences of the decision-maker a measure of his/her subjective probabilities through the marginal reservation prices for the purchase or sale of a bet on the event to which the probability refers and also have an indication on the uncertainty aversion of the agent under examination. Some comments on the use of preferences and decisions under uncertainty in economic theory are presented in the conclusion.

Suggested Citation

  • Aldo Montesano, 2025. "On the decision under uncertainty in economic theory," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 72(2), pages 1-12, December.
    • Handle: RePEc:spr:inrvec:v:72:y:2025:i:2:d:10.1007_s12232-025-00501-1
    DOI: 10.1007/s12232-025-00501-1
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    References listed on IDEAS

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    1. Pareto, Vilfredo, 2014. "Manual of Political Economy: A Critical and Variorum Edition," OUP Catalogue, Oxford University Press, number 9780199607952 edited by Montesano, Aldo & Zanni, Alberto & Bruni, Luigino & Chipman, John S. & McLure, Michael.
    2. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    3. Gilboa,Itzhak, 2009. "Theory of Decision under Uncertainty," Cambridge Books, Cambridge University Press, number 9780521517324, November.
    4. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
    5. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
    6. Aldo Montesano, 2022. "On the economic foundations of decision theory," Theory and Decision, Springer, vol. 93(3), pages 563-583, October.
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