The Paradox of the Bayesian Experts and State-Dependent Utility Theory
When n individuals satisfy the axioms of subjective expected utility (SEU) theory and these individuals' probabilities or/and utilities are sufficiently diverse, it is impossible to aggregate the individuals' preferences into a (n + 1)-preference which is both Paretian and in agreement with SEU theory. The paper restates this paradox in the framework of Anscombe and Aumann's axiomatization of SEU and investigates the consequences of relaxing their state-independence assumption. The paradox disappears from the pure state-dependent framework but reappears in a different form in a sophisticated variant of state-dependent utility theory which achieves the uniqueness of subjective probabilities. The paper compares this novel impossibility result with the earlier one. It concludes by discussing the foundations of the Pareto principle in both the ex ante and ex post versions.
|Date of creation:||01 Jun 1996|
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- Karni, Edi & Schmeidler, David, 1993.
"On the Uniqueness of Subjective Probabilities,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 267-277, April.
- Karni, E. & Schmeidler, D., 1991. "On the Uniqueness of Subjective Probabilities," Papers 1-92, Tel Aviv - the Sackler Institute of Economic Studies.
- De Meyer, Bernard & Mongin, Philippe, 1995. "A note on affine aggregation," Economics Letters, Elsevier, vol. 47(2), pages 177-183, February.
- De Meyer, B. & Mongin, P., "undated". "A note on affine aggregation," CORE Discussion Papers RP 1136, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- DE MEYER, Bernard & MONGIN , Philippe, 1994. "A Note on Affine Aggregation," CORE Discussion Papers 1994014, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Bernard De Meyer & Philippe Mongin, 1995. "A note on affine aggregation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00259707, HAL.
- ZHOU, Lin, 1996. "Bayesian Utilitarianism," CORE Discussion Papers 1996011, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Mongin Philippe, 1995. "Consistent Bayesian Aggregation," Journal of Economic Theory, Elsevier, vol. 66(2), pages 313-351, August.
- Mongin, P., "undated". "Consistent Bayesian aggregation," CORE Discussion Papers RP 1176, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- MONGIN, Philippe, 1993. "Consistent Bayesian Aggregation," CORE Discussion Papers 1993019, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- John Broome, 1990. "Bolker-Jeffrey Expected Utility Theory and Axiomatic Utilitarianism," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 477-502.
- Hammond, Peter J, 1981. "Ex-ante and Ex-post Welfare Optimality under Uncertainty," Economica, London School of Economics and Political Science, vol. 48(191), pages 235-250, August.
- F J Anscombe & R J Aumann, 2000. "A Definition of Subjective Probability," Levine's Working Paper Archive 7591, David K. Levine.
- Mark J. Schervish & Teddy Seidenfeld & Joseph B. Kadane, 1991. "Shared Preferences and State-Dependent Utilities," Management Science, INFORMS, vol. 37(12), pages 1575-1589, December.
- Karni, Edi, 1993. "A Definition of Subjective Probabilities with State-Dependent Preferences," Econometrica, Econometric Society, vol. 61(1), pages 187-198, January. Full references (including those not matched with items on IDEAS)
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