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Act similarity in case-based decision theory (*)

  • Itzhak Gilboa

    (KGSM-MEDS, Northwestern University, Leverone Hall, Evanston, IL 60208, USA)

  • David Schmeidler

    (Tel Aviv University and Ohio State University, Department of Economics, Arps Hall, 1945 N. High St., Columbus, OH 43210, USA)

Case-Based Decision Theory (CBDT) postulates that decision making under uncertainty is based on analogies to past cases. In its original version, it suggests that each of the available acts is ranked according to its own performance in similar decision problems encountered in the past. The purpose of this paper is to extend CBDT to deal with cases in which the evaluation of an act may also depend on past performance of different, but similar acts. To this end we provide a behavioral axiomatic definition of the similarity function over problem-act pairs (and not over problem pairs alone, as in the original model). We propose a model in which preferences are context-dependent. For each conceivable history of outcomes (to be thought of as the "context" of decision) there is a preference order over acts. If these context-dependent preference relations satisfy our consistency-across-contexts axioms, there is an essentially unique similarity function that represents these preferences via the (generalized) CBDT functional.

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Article provided by Springer in its journal Economic Theory.

Volume (Year): 9 (1996)
Issue (Month): 1 ()
Pages: 47-62

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Handle: RePEc:spr:joecth:v:9:y:1996:i:1:p:47-62
Note: Received: May 9, 1995;revised version October 4, 1995
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  1. Itzhak Gilboa & David Schmeidler, 1993. "Case-Based Knowledge Representation," Discussion Papers 1053, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Itzhak Gilboa & David Schmeidler, 1993. "Case-Based Consumer Theory," Discussion Papers 1025, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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