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An exchangeability-based finite-state axiomatization of subjective probability

Author

Listed:
  • Soo Hong Chew

    (Southwestern University of Finance and Economics
    National University of Singapore)

  • Jacob S. Sagi

    (University of North Carolina)

  • Wenqian Wang

    (Southwestern University of Finance and Economics
    Hong Kong University of Science and Technology (Guangzhou))

Abstract

We axiomatize subjective probabilities on finite domains without requiring richness in the outcome space or restrictions on risk preference through event exchangeability, defined in Chew and Sagi (Econometrica, 74:771–786, 2006), which was implicit in the prior literature (Savage in The Foundations of Statistics, Weily, NewYork, 1954; Machina and Schmeidler in Econometrica, 60:745–780, 1992; Grant in Econometrica, 63:159–189, 1995). We characterize the unique subjective probability representing the underlying exchangeability relation and apply this subjective probability to characterize finite-state probabilistic sophistication.

Suggested Citation

  • Soo Hong Chew & Jacob S. Sagi & Wenqian Wang, 2025. "An exchangeability-based finite-state axiomatization of subjective probability," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 80(3), pages 685-702, November.
    • Handle: RePEc:spr:joecth:v:80:y:2025:i:3:d:10.1007_s00199-025-01637-5
    DOI: 10.1007/s00199-025-01637-5
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    References listed on IDEAS

    as
    1. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    2. Nakamura, Yutaka, 1990. "Subjective expected utility with non-additive probabilities on finite state spaces," Journal of Economic Theory, Elsevier, vol. 51(2), pages 346-366, August.
    3. Hong Chew Soo & Karni Edi, 1994. "Choquet Expected Utility with a Finite State Space: Commutativity and Act-Independence," Journal of Economic Theory, Elsevier, vol. 62(2), pages 469-479, April.
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    7. Chew, Soo Hong, 1983. "A Generalization of the Quasilinear Mean with Applications to the Measurement of Income Inequality and Decision Theory Resolving the Allais Paradox," Econometrica, Econometric Society, vol. 51(4), pages 1065-1092, July.
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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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